Gov't rolls out incentives In numbers to boost local car makers

ESTHER MWANGI AND LUCY MUKUI-KNA

The local automotive industry is poised for a boom after the government announced plans to unveil a Sh13 billion affordable credit financing kitty for players in the sector.

To further boost local manufacturing of automobile accessories, the State has introduced incentives and tax regulations, such as the duty remission scheme, to regulate the importation of parts including batteries, radiators, and brake fluids, among others.

Cabinet Secretary for Investments, Trade and Industry, Mr. Lee Kinyanjui, said the government’s decision is aimed at enhancing the use of locally manufactured parts, to promote the country’s manufacturing sector.

At the same time, the CS affirmed that the recently approved Kenya National Automotive Policy marked a significant step toward transforming the country’s automotive industry.

By focusing on local manufacturing, promoting cleaner vehicles, and fostering a thriving ecosystem, the Cabinet Secretary said the policy would create a more sustainable and prosperous automotive sector.

He revealed that the government was planning to raise a bond in Japan, with at least Sh13 billion from the proceeds earmarked to promote the growth of the local automobile industry by providing affordable credit facilities to players in the sector.

Kinyanjui noted that Kenyan firms with the capacity to manufacture tyres, tubes, batteries, windscreens, oil filters, gaskets, bushes, suspension springs, seats, seatbelts, oil seals, air cleaner elements, shock absorbers, spark plugs, and mats, among other accessories, would be eligible for funding.

He added that to establish a robust local automobile industry, the government was fostering a stable policy framework, endorsing business-friendly tax regimes, ries to assembly plants,” explained the CS.

Kinyanjui, who was the chief guest at the Nakuru County Investment Roundtable Forum, also noted that local assemblers were enjoying import and excise duty exemptions for semi-knockdown kits to promote local assembling.

Kenya’s local automotive assembly plants currently have an installed capacity to assemble 46,000 units annually. The Cabinet Secretary emphasized that the automotive industry has been a pillar of industrialization in many economies and a key driver of macroeconomic growth and technological advancement.

He also noted that imported veenhancing security for businesses and investors, and investing in infrastructure such as roads, water supply networks, and reliable power supply systems to support long-term industrialization.

The CS further said government interventions to strengthen the automobile industry were targeted at delivering significant dividends in employment creation, technology transfer, and contribution to the gross domestic product (GDP).

“The economy is expected to greatly benefit from government incentives in the sector through direct cash injection and the creation of additional jobs for local automobile assembly firms as well as suppliers of parts and accessohicles, including second-hand units, attract duties of between 25 percent and 35 per cent.

Another upswing of this was creation of additional employment for local suppliers of parts and accessories to the assembly plants.

Current official data shows that Kenya imports an average of 7,600 second-hand vehicles per month, with the average number of assembled units standing at about 430.

Kinyanjui stated that widespread use of second-hand spare parts in the country was mainly due to non-availability of new parts locally and rampant use of counterfeit and substandard spare parts.

He indicated that the automotive industry has a long value chain creating both backward and forward linkages, where he explained that backward linkages included design and manufacture of vehicle bodies and other components, not forgetting that the automotive industry consumes steel, iron, aluminum, plastic, glass, carpeting, textiles, computer chips, rubber, and much more.

Kinyanjui observed that the industry creates forward linkages through vehicle dealers, garages, leasing firms, insurance firms, and financial institutions, among others and urged local assemblers of automotives to utilize locally assembled parts to spur growth in the sector and generate jobs.

Over reliance on imported spare parts, stated the Cabinet Secretary, had constantly diluted growth in the automotive sector, inhibiting the intended impact to the economy. He however said the future was bright after the National Government approved the National Automotive Policy.

The policy is designed to support the growth and transformation of the automotive industry in Kenya into a significant contributor to the national GDP under manufacturing.

“Kenya’s automotive sector is experiencing a significant transformation as technology, environmental priorities and economic development intersect. To monitor, moderate and boost this transformation, the National Automotive Policy was proposed and approved to promote automotive manufacturing in Kenya,” the Cabinet Secretary elaborated.

The Kenya National Automotive Policy aims to revitalize the automotive industry by promoting local assembly and manufacturing, gradually reducing reliance on imported used vehicles.

This includes a shift towards Complete Knocked Down (CKD) assembly, with the goal of creating jobs and fostering economic growth. The policy also addresses environmental concerns, setting standards for emissions, promoting green initiatives and enhances the adoption of environmentally friendly practices.