Production plant in Kenya

 

Kenya’s automotive industry has been evolving over the years, with a growing focus on local assembly and the emerging electric vehicle (EV) sector. While the country does not yet have a fully developed vehicle manufacturing ecosystem, it has made strides in local assembly, policy reforms, and investments in electric mobility, offering opportunities and good prospects, particularly in the EV sector. However, significant challenges persist throughout the automotive industry.

 

Local vehicle assembly in Kenya’s automotive sector is dominated by local assembly plants rather than full-scale manufacturing. Key players include Associated Vehicle Assemblers (AVA). Based in Mombasa, AVA assembles trucks, buses, and pickups for brands like Mitsubishi, Hyundai, and Tata. Kenya Vehicle Manufacturers (KVM) is a partnership between DT Dobie (Mercedes-Benz) and the government, assembling trucks and buses. Mobius Motors, a Kenyan startup produces rugged, low-cost SUVs designed for African roads. Isuzu East Africa is the largest assembler in Kenya, producing Isuzu trucks, pickups, and buses.

 

The government has been pushing for local content requirements to boost assembly, including tax incentives for companies that source parts locally. For despite local assembly efforts, Kenya still imports more than 90 per cent of its vehicles, mainly used cars from Japan, Europe, and the UAE. The secondhand car market dominates, making up about 85 per cent of vehicle registrations due to affordability.

 

Government Policies & Incentives

Keya’s Automotive Policy (2019) aims to increase local assembly to 50,000 vehicles annually by 2030. To achieve these higher targets, import taxes are imposed on used cars (up to 35 per cent) compared to lower taxes (10–20 per cent) on locally assembled vehicles. There are also Special Economic Zones (SEZs) set up as incentives for manufacturers to do business, such as Athi River, not far from Nairobi.

 

The Electric Vehicle (EV) Sector in Kenya

Kenya’s EV market is still in its early stages but is growing due to rising fuel costs, environmental concerns, and government support. Current EV players & developments include BasiGo & Roam (formerly Opibus), leading EV startups. BasiGo focuses on electric buses (using BYD technology) for public transport, while Roam produces electric motorcycles (e-boda bodas), buses, and off-grid charging solutions. Kiri EV is a Kenyan startup producing affordable electric tuk-tuks and motorcycles.

Major incentives have been undertaken by government and private sector initiatives, including a draft EV Policy in 2023 and proposed tax breaks and investments to develop charging infrastructure and EV adoption targets. Plans exist to build EV charging stations and charging points in major cities. A partnership with China & the EU has been effected to transfer technology and investment in the motor sector, especially EV assembly.

Key Challenges in Kenya’s Vehicle Manufacturing

High production costs plague the industry across Kenya. Expensive electricity and reliance on imported parts increase assembly costs considerably. A limited local supplier base results in most components (engines, electronics) being imported from overseas. These challenges have resulted in poor EV adoption among the local populace, including high upfront costs, making EVs still more expensive than petrol/diesel vehicles.

 

Limited charging infrastructure and hardly any charging stations outside Nairobi make adoption a challenge. And although Kenya’s grid is improving, rural areas still face blackouts. Additionally, there is either no local battery production or very little recycling, both of which would help improve the situation.

 

Barriers to Growth

Cheaper used cars are a major barrier to local assembly growth. Weak enforcement of vehicle age limits: despite a 5-year limit on used imports, older cars are still allowed to enter the market. Financing and investment are additional barriers, including high interest rates, which make it difficult for manufacturers to access credit.

Added to this, there is low consumer purchasing power. Many Kenyans whose average monthly salary is US$300.00 cannot afford to buy new cars, preferring used imports instead. Government could increase control by enforcing regulations and age limits and higher taxes to boost local demand. On the other hand, they could offer incentives on EVs such as tax exemptions, subsidies, and infrastructure investments.

Kenya’s emerging automotive market, however, offers opportunities for growth and expansion of local assembly. There is capacity for more partnerships between global automakers (Toyota, Volkswagen) and Kenyan firms. The component manufacturing sector is almost untouched, and there is massive potential to develop local steel, plastics, and battery production.

 

Future Outlook and Beyond

More automakers may set up plants due to significant growth in the EAC markets. And with falling battery costs, EVs could become prevalent by 2030. Kenya has strong potential to become the regional hub for supplying EVs and assembled vehicles to the EAC over the next decade. With the right policies and investments, Kenya’s automotive and EV industry could drive economic growth and sustainable mobility across East Africa and Africa.al change.