The motor vehicle industry in Kenya peaked in the 1980s with the local production of the Nyayo Car being a highlight. However, the liberalisation of the economy negatively impacted the growth of this industry with the introduction of imported second-hand car parts.

The National Automotive Policy (NAP), approved by the Ministry of Industrialization in 2022, is aimed at providing the domestic industry with opportunities to achieve competitiveness in local manufacturing and sale of automotive products by gradually reducing and eventually eliminating the importation of used vehicles and parts and creating stability with the tax laws. This policy is also in line with the numerous agreements, protocols and conventions aimed at preserving the environment by encouraging the production of emission-efficient vehicles.

The Kenyan Constitution, in the Fourth Schedule, the Distribution of Functions between the National and County Governments, as well as the Kenya Vision 2030 Blueprint and the Kenya National Industrialization Policy Framework, 2012 guide this policy. The rationale behind this is the transformation of Kenya into a newly industrialised middle-income country providing a high quality of life to all the citizens. To add to this, The Bottom-Up Economic Transformation Agenda greatly focuses on manufacturing by increasing investments.

Objectives of NAP

Provision of opportunities to achieve competitiveness in the manufacturing and engineering of automotive products in the domestic industry is, overall, the objective of this policy. However, there are several specified objectives covered, such as:

• Enhancement of value addition while supporting local manufacturers – this provides an opportunity for joint ventures with international players;
• Heightened contribution to the GDP – growth in the automotive industry through domestic and export consumption;
• Increased local assembly and production of the automotive products to 20,000 units within the first two years of the policy implementation;
• Creation of jobs and development of skills – the focus is on qualitative and quantitative improvements in the skills to ensure competitiveness and lay solid ground in the industry over the next 10 years;
• For innovation, research and development to be enhanced, the policy aims at providing a supportive environment. The main areas being looked into are local design and engineering, development and acquisition of disruptive technologies.

Global benchmark

In Malaysia, a similar policy was launched in 2020 to enhance the automotive industry in the era of digital industrial transformation by focusing on Next-Generation Vehicles and the government has identified areas to focus on to ensure the objectives have been met. The areas are:

•         Technology and Engineering
•         Investment
•         Market Expansion
•         Value Chain Development
•         Human Capital Development
•         Safety, consumerism and environment

South Africa’s Automotive Master Plan 2021-2035 runs with an objective to produce 1% of global vehicle production, or 1.4 million vehicles, per annum in South Africa by 2035 which will substantially improve the country’s status and global vehicle production ranking. The Automotive Production Development Program aims at stimulating local production of automotive components while maintaining the incentives for original equipment manufacturers to manufacture passenger cars and light commercial vehicles in the country for export and the local market.  One of the attractions of South Africa’s automotive policy over the past two decades has been its long-term vision and consistency.

In May, Nigeria adopted a new national automotive policy that would spin through 2023 to 2033 to explore how the automotive industry can migrate seamlessly from combustible engines into electric solar-powered engines.

Challenges being addressed and measures taken

Importing vehicles is a costly affair and exports job opportunities to the country’s detriment. This policy seeks to address several challenges rooted in the automotive industry such as:

• Missing legal framework for the automotive industry
• Inhibition of local component manufacturing and local content development through the lack of review of East Africa Customs Management Act;
• Importation from global franchise instead of locally sourcing;
• Skills gap in relation to the education curriculum, trending technologies and industry skills thus encouraging training on the job meaning an increment in production;
• Influx of imported products affects market volumes;
• Poor implementation of Public Procurement and Asset Disposal Act, 2015 on reservation of local goods;
• Lack of Capital Requirements Directive Regulations to support local motorcycle assembly;
• The 8-year age limit for second-hand vehicles does not accommodate local assembly;
• Counterfeit and low-quality imported products.

Some of the measures that the government intends to take up so as to deal with these challenges are:

• Creation of an institutional, legal and regulatory framework for the implementation of the National Automotive Policy;
• Prioritize the production of commercial vehicles;
• Providing incentives on different levels of vehicle breakdown;
• Promotion of a phased incubation approach to grow and graduate the local entrepreneurs in motor vehicle component manufacturing in Kenya;
• Encouraging and facilitating sub-contracting amongst established assemblers and the local SMEs;
• Hastening progression and phased advancement from Semi Knocked Down to Completely Knocked Down;
• Market access for local manufacturing
• Harmonization of the UN agreements dated 1958, 1997 and 1998 to provide a legal and regulatory framework and provision related to performance-oriented test requirements and procedures for contracting parties.

This National Automotive Policy also establishes the National Automotive Council which will create a national platform for dialogue on automotive issues, which will comprise representatives from government and automotive sector stakeholders.

Regionally, the demand for vehicles is growing rapidly and this is being quenched by the importation of used vehicles. However, with this policy’s guiding principles being equity, product safety and standards conformity, environmental stability, creativity and innovation, local empowerment and sustainable development; there is room for growth of the local market.

The Competition Authority of Kenya also received a complaint from the Kenya Auto Bazaar Association against new motor vehicle dealers and assemblers claiming that the operationalization of this policy would introduce unfair competition. CAK has however not taken any further action seeing to it as the policy is yet to be implemented.

The delay in the implementation of the policy has slowed down global investors in localising their products which would increase the production activity and reduce the cost of the products.