Business
Chinese car brands gain favor with Kenyan consumers
By Gitonga Njeru  ·  2021-04-30  ·   Source: ChinAfrica

 

Vehicle sales in Kenya are expected to grow rapidly in 2021 (HELLORF)  

Phillip Ochieng, 49, works for a goods delivery company in Nairobi. He is the head driver and manager of Home Delivery Services based in the Kenyan capital.

The medium-sized company has a total of 47 Chinese-made cars and trucks in its fleet.

On average, the price of medium-sized Chinese-made trucks in the country is about $34,000, much more affordable than similar trucks of competing brands that retail for about $62,000.

"Most delivery companies prefer Chinese-made vehicles, including the one I work for as a driver. We use Beiqi Foton trucks. We deliver anything heavy from furniture, electronics and household goods," said Ochieng, who has managed the company for 10 years. "In my own opinion, Chinese vehicles are easy to drive and they have great internal comfort. They are also not heavy on fuel."

Ochieng said that until eight years ago, no one would have thought that Chinese vehicles would have made such a big impact on the public transport sector. Japanese brands Isuzu and Toyota previously dominated the market, but he said that is changing.

"As a company, we get the vehicles locally from their assembly plant and find they are durable. I plan to buy my own two Foton vehicles for a business I'm planning to open once I leave formal employment," said the aspiring entrepreneur.

Government encouragement 

According to the Ministry of Industrialization, Trade and Enterprise Development, the vehicle brands such as Beiqi Foton are bought at wholesale prices, which is cheaper than importing vehicles.

"This is partly because the vehicles are locally assembled and the government reduced tax on automobile parts. Foton was the first Chinese brand to open a local automobile assembly plant in the country in mid-2014," said the ministry's Cabinet Secretary (Minister) Betty Maina.

She added that this is also meant to encourage mass production to compete with international automobile manufacturing companies.

According to figures from the Ministry of Transport, Infrastructure, Housing and Urban Development, one in three Kenyan vehicle buyers buys or owns a Chinese-made vehicle. The sales have been on a steady rise since January 2019.

Figures from 2019 show that 15,444 vehicles were sold and registered that year. Many were for military, police, public transport as well as personal use.

"In 2020, there was a sharp decline in the total purchase of all vehicles from April. We registered few new vehicles. This is mostly due to the COVID-19 pandemic. In fact, more people had to sell their personal vehicles to meet the economic challenges such as job losses," said the ministry's Cabinet Secretary (Minister) James Macharia. "Only 11,224 cars were sold last year. But we expect things to improve this year and the figures to surpass those of 2019 by a large margin."

Macharia added that the popularity of Chinese vehicles is seen in the security and public transport sector.

"They are used as public service vehicles, but the demand is also growing for personal use, such as in luxury cars," said Macharia.

"We license and register vehicles based on their category. That is how we keep our records as a ministry. If a vehicle is used for public transport, such as ferrying passengers, delivering goods, taxis and personal use, we keep files [on them]," said Macharia.

He confirmed that his ministry plans to bring more Chinese automakers on board between now and next year.

"We are in discussions with other automakers in China to open up offices and automobile assembly plants in the country. Automakers such as FAW Group, SAIC Motor and Dongfeng would most likely have assembly facilities here once talks are finalized," said Macharia.

Employment provider 

This means that more direct local jobs will be created in this sector. Currently, the Chinese automobile companies have created more than 40,000 direct jobs in Kenya according to the Ministry of Labor and Social Protection.

Chinese car brand Chery Automobile sold more than 20,000 cars in Africa in 2019, with 3,000 of those in Kenya. It also has an assembly line and a regional office in Nairobi. The company hopes to make bigger inroads in Kenya this year.

Chery's assembly plant in the capital is one of its 16 facilities outside China.

Experts say that with Chinese automakers investing heavily in the Kenyan transport industry, more local jobs will be made available.

"Apart from an increase in local jobs, more regional jobs will also be created. The figure of direct and indirect jobs could rise to about 200,000 from Chinese automobile manufacturing companies. This [applies to the whole] East Africa region," said James Shikwati, a development economist and founder of the Inter-Region Economic Network, a leading independent African think tank.

Shikwati said that as the economy grows, more jobs will become available. The World Bank recently estimated the economy to grow by 6 percent this year, the best economic performance in more than a decade.

After opening an assembly plant in 2014, Foton also opened regional offices and appointed four motor dealers to market its brands.

One of the dealers is Pewin Motors, headed by Director David Kirigua.

"In 2019, we had made good sales not [only] in Kenya, where more than 3,000 vehicles were sold, but the entire region. We sold trucks such as anti-riot vehicles to the police. But our biggest sales were to public transport companies. The demand has been growing, but we faced challenges last year associated with COVID-19," he said.

He was optimistic about a better sales performance this year and in the first two months of 2021, sales have been encouraging, despite the COVID-19 pandemic still posing an economic threat.

Kirigua said that there has also been a high demand for high-speed sports cars in the Foton brand range.

Chinese carmaker Hawtai also plans to open a local assembly plant in Nairobi this year after concluding discussions with the government.

Most of the vehicle manufacturers operating in Kenya have a partnership with banks on providing financing to potential customers with stable employment and a sound credit history.

Economists like Shikwati predict that it would not be surprising if one of every two cars sold within the next two to three years in Kenya will be a Chinese brand.

"In public transport, most cars are Chinese, the only exception being the taxi business; but it's just a matter of time before that changes [too]," said Shikwati.

(Reporting from Kenya) 

(Print Edition Title: Driven to Succeed) 

Comments to zanjifang@chinafrica.cn 

 

 

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