markets

Simba of Kenya Says Renault Considering Local Auto Assembly

Updated on
  • Company in talks with four manufacturers including Mahindra
  • New-car sales seen growing 15% in 2018 on government orders

Simba Corp., a closely held Kenyan company, is in talks with four automakers including Renault SA of France about assembling their vehicles in East Africa’s biggest economy.

The manufacturers are seeking to tap demand in an industry that’s expected to grow 15 percent this year, Chief Executive Officer Adil Popat said in an interview Wednesday in the capital, Nairobi. Another of the companies interested in making its vehicles in Kenya is Mahindra & Mahindra Ltd. of India, he said, declining to identify the other two.

The four incoming firms would add to the growing number of car manufacturers targeting Kenya after Volkswagen AG, Peugeot SA, CNH Industrial NV and Nissan Motor Co. Ltd announced plans for assembly lines in the country in the past 18 months. Vehicle production is expected to expand more than 14 percent annually over the next four years, driven by expanding domestic demand and improving export opportunities, Fitch Group’s BMI Research said in January.

The automakers are seeking assurances from Kenya’s government on tax incentives and a commitment to gradually phase out imports of second-hand vehicles to guarantee the viability of local assembly, he said.

“It’s a volume business,” Popat said. “We need to commit numbers.”

A spokeswoman for Renault declined to comment and Mahindra didn’t immediately respond to emailed questions.

New Policy

Kenya’s Industrialization Ministry is considering a new motor-vehicle policy that stipulates tax breaks and age limits for imported used cars. The new legislation will be published for public review in June, according to the government’s principal secretary for industrialization, Betty Maina.

“Our intention is to support local assembly, both commercial and passenger vehicles,” she said by phone. “The industry has been very involved in this policy, so we hope to have it out and have it adopted by cabinet as soon as possible.”

Simba owns the Mombasa-based Associated Vehicle Assemblers, a contract assembly plant that produces light and heavy trucks for companies such as Toyota Motor Corp. and Hino Motors Ltd. of Japan, Tata Motors Ltd. of India and South Korea’s Daewoo Motor Co., Mitsubishi Fuso Truck & Bus Corp., Scania AB and Foton Motor Co.

New-vehicle sales slumped 20 percent to 11,044 in Kenya in 2017, when a dispute over the outcome of an August presidential election and a rerun in October ground the economy to a halt. While the market has got off to a “slow start,” sales are expected to pick up, driven largely by government orders, Popat said.

Simba’s auto division makes up 85 percent of the company’s total revenue, Popat said. The unit includes Simba Colt Motors Ltd., which holds the franchises to sell vehicles brands including Mitsubishi Fuso, Mahindra, Renault and BMW. Other divisions are leasing, real estate, and hospitality, where it owns the Kempinski franchise.

Popat said plans to list Simba on the Nairobi bourse are still part of its strategy and will be clearer once an ongoing restructuring of the business is completed by the end of this year.

— With assistance by Ania Nussbaum

(Updates with ministry’s comment from first paragraph below New Policy subheadline.)
    Before it's here, it's on the Bloomberg Terminal. LEARN MORE