Car parts manufacturer expects quadruple growth after embargo

Vehicle parts manufacturer Auto Springs East Africa has projected a quadruple growth in demand for locally assembled vehicles in the next five years.

This follows a Government ban on imports of used buses and trucks. 

Auto Springs East Africa Chief Executive Officer Nephat Njengwa said the ban will enable the manufacturer operate on full capacity from the current two-thirds. 

“This (the ban) is very key to our economy,” he said in an interview, describing the decision by Kenya Bureau of Standards (Kebs) as a ‘good catalyst’ for economic growth.

The notice by Kebs, which came out a month ago, effects the KS1515:2019 standards outlaws importation of second-hand buses and trucks effective July 1, 2022.

The ban targets passenger minibuses, midibuses, large buses, single articulated and biarticulated business and double decker buses.

Increase demand

It also includes all rigid trucks with Gross Value Mass equal to or greater than 3.5 tonnes and up to and including 30 tonnes.

Mr Njengwa said the country imports about 100,000 vehicles every year and only about 10,000 are assembled locally.

“That means we lose in terms of foreign exchange, scale – both for parts manufacturers and assemblers,” he said.

He said that there is potential to produce up to 50,000 locally assembled vehicles.

Mr Njengwa added that commercial vehicles – which is the lot affected by the ban – comprise 50 per cent of the imported automobiles.

If this ban take effect, he said, then business for parts manufacturers like his firm will grow.

He says the effect will increase demand among original equipment manufacturers (OEMs) like Isuzu, Toyota, Simba Corporation.

Apart from OEMs, the firm also supplies to spare parts shops and distributors as its other line of business. “I think over the next couple of years we will see the demand grow four times,” explained Mr Njengwa. 

“That means more employment, more revenue to government in terms of taxes and whole trickle-down effect to our suppliers and other service providers.”

According to the 2022 Economic Survey, the number of assembled vehicles in the country stood at 9,989 in 2021 while imported was 103,859. This was an overall growth of 18.9 per cent. 

“This was on account of an increase in the number of assembled motor vehicles by 29.3 per cent from 7,725 assembled vehicles in 2020 to 9,989 assembled vehicles in 2021,” reads the report.