•The company has committed an initial investment of Sh800 million in the Thika based-Kenya Vehicle Manufacturers Limited plant.
•On renewable energy, the agreement includes the Sh15 billion Meru Wind Farm Energy, Sh8 billion Isiolo Solar Energy and Sh75 Billion Menengai Geothermal Plant.
Kenya and Japan’s motor vehicle giant Toyota have entered into a vehicle manufacturing deal that will see the firm set up base locally.
This is part of renewed efforts by the government to cut used-car imports and increase local production of new units.
The two also signed an agreement for collaboration in renewable energy development; as President William Ruto continues woo foreign investors.
The motor vehicle agreement will see Toyota Tshusho Corporation commit an initial investment of Sh800 million in the Thika based-Kenya Vehicle Manufacturers Limited plant.
Ruto who witnessed the signing on Wednesday, on the sideline of his official visit to Japan, said the deal would bolster Kenya’s industrial sector, strengthen Kenya-Japan ties and expand opportunities for Kenyans.
The goal, he said, is to ensure locally manufactured vehicles are affordable and thus discourage the purchase of used cars.
“We must have a balance between the number of imported and newly manufactured vehicles,” The President said in a statement.
The President witnessed the signing of the agreement in the presence of Toyota Tsusho Corporation of Japan President Ichiro Kashitani, in Tokyo.
The renewable energy deal included Sh15 billion Meru Wind Farm Energy, Sh8 billion Isiolo Solar Energy and Sh75 Billion Menengai Geothermal Plant.
It also entails the promotion of Electrified Vehicles including hydrogen electric vehicles and hybrid vehicles.
Japan is Kenya’s biggest import source for second-hand cars, with traders and individuals bringing in between 7,000 and 10,000 units a month.
More than 80 per cent of the cars on Kenyan roads are used cars from Japan that are sold at cheaper prices averaging Sh300,000.
Taxes and import costs however push the prices to above a million once they land in the Kenyan markets.
Other key sources are UAE, UK, Thailand and South Africa.
Toyota Tsusho had in July last year announced the commencement of Semi Knocked Down (SKD) production of Toyota Motor Corporation (Toyota)’s former Fortuner SUV at the Associated Vehicle Assemblers Limited (AVA)’s Mombasa plant, a vehicle production contractor in Kenya.
Semi-knockdown is a method of vehicle assembly that the welded and painted body is imported and the components parts are assembled with body and chassis, or its parts configuration.
Most of new cars sold in the local showrooms are either completely knocked down or SKDs which are imported for assembly.
Uptake of new cars have traditionally remained low owing to the higher asking price compared to imported second-hand units.
According to the Kenya Motor Industry Association (KMIA) data, dealers in new cars in Kenya recorded a slowdown in the 11-months to November, as the weak shilling and higher taxes pushed up prices, amid reduced disposable income.
Industry data shows the 14 major dealers in the country sold a total of 10,595 units in the year to November, lagging behind the previous year’s sales.
A total of 13,352 units were sold within a similar period in 2022, which was also a drop from 14,250 units sold in 2021.
These are vehicles with zero mileage sold at showrooms.
Majority of the new units sold during the 11 months were imported parts that are brought in and assembled in the country (8,329) while locally fully built units were 2,211, pointing to slow activities in the local motor vehicle building industry.
Trucks top the category of new vehicles sold in the country, signalling sustained activities in the construction, manufacturing and transport sector.
Other notable sales are in single and double cabin pick-ups and small buses used in the matatu industry, luxury SUVs (Sports Utility Vehicle) and prime movers.
This, as the agriculture, public transport and retail sector continued to remain stable, albeit the high production and costs of doing business.
Isuzu retained the lead in new vehicle sales with a 46.9 per cent market share, selling 4,973 units, followed by Toyota, which sold 2,820 units accounting for 26.6 per cent of total vehicles sold.
A shaky dealership environment has seen a number of shifts and mergers locally, with Toyota Kenya the distributor and service provider of Toyota vehicles, rebranding last year to CFAO Motors, in a move management said would enhance its value proposition in the automotive market.