Volvo Trucks of Sweden has taken the cue of international auto firms seeking to set up base in Kenya for their operations in East Africa, lured by tax incentives by the government.
The company announced yesterday it will open a $25 million ( Sh2.58 billion ) assembly plant in Mombasa following its partnership with NECST Motors in the first quarter of 2018.
The assembly plant will have an annual production capacity of 4,500 units.
The government has scrapped the excise tax on locally assembled cars and motorcycles in a bid to spur local assembling and manufacturing.
This has paved way for a number of international vehicle manufacturers to set up shop in Kenya including France’s PSA Group, the maker of Peugeot. The firm in February signed a contract to start assembling two car models in Kenya.
German manufacturer Volkswagen began assembling cars in Thika last year while India’s Ashok Leyland is also planning to set up an assembly plant in the country.
“Preparations for the assembly plant in Mombasa are under way. We expect to have something coming out by the first quarter of 2018. Direct Investments into the plant will cost about $25 million,” Volvo Trucks East Africa director Micke Rydbeck said in Nairobi yesterday.
Volvo Trucks is seeking to expand its footprint in East Africa, investing in 20 new workshops across the region through its partnership with NECST Motors, which will become the firm’s exclusive importer of the Swedish truck brand.
The planned investment is expected to create approximately 300 direct jobs, in addition to other indirect employment opportunities.
“Going forward, our focus will be on not only gaining new market shares but also raising the overall standard of customer satisfaction by expanding the after-sales network, training our staff and ensuring the availability of genuine Volvo parts,” NECST co-founder and chairman Erik Eberhardson said.
Presiding over the signing of the deal, Kenya Investment Authority managing director Moses Ikiara lauded the partnership saying “it complements the Government’s effort to expand the manufacturing sector.”
He said that although the SGR is expected to cut transport costs by 40 per cent, there will be enough business for everyone.
“We should not see the railway as direct competition, what we are looking at is the last mile. The railway can only transport goods from one point to another but the goods still need to reach the customer and that is where we see an opportunity,” Volvo Trucks president Claes Nilsson.