Motor dealer DT Dobie has priced the first passenger car to be assembled locally at less than Sh2 million, targeting corporate and price-sensitive individual customers.
The Volkswagen Polo Vivo will be launched on December 21 at the Thika-based Kenya Vehicle Manufacturers (KVM) in a ceremony where President Uhuru Kenyatta is expected to be guest of honour.
“We are targeting a price below Sh2 million for the Polo Vivo. It is a car for a small family,” DT Dobie chief executive Zarak Khan said in an interview. The car has a 1.4 litre petrol engine with an automatic transmission and air-conditioning. This will be the first time the Polo Vivo will be available in Kenya. The model sells for about Sh1.3 million in South Africa where it is the best-selling passenger car.
Its introduction in Kenya marks the latest attempt by new vehicle dealers to wrest market share from used car sellers who account for about 80 per cent of total vehicle sales.
The formal dealers are betting on the prices of less than Sh2 million combined with multi-year warranty and after-sales service to gain an edge over second-hand imports whose key selling point is knockdown prices.
Simba Corporation early this year started selling Renault Kwid, a small SUV, at Sh1.2 million inclusive of VAT. The Kwid has an 800cc engine and is being offered with a three-year warranty.
DT Dobie and Simba are eyeing first-time car buyers among the burgeoning middle class who largely rely on imported used cars from Japan which are priced lower than new vehicles.
Second-hand cars sell from as low as Sh700,000 depending on the model, year of manufacture and its condition.
Simba had sold 13 units of the Renault Kwid in the 10 months to October, according to data from the Kenya Motor Industry Association (KMI).
For DT Dobie, the introduction of the Polo Vivo entrenches the Volkswagen franchise it acquired from CMC Holdings.
Other VW models, including light trucks, will also be assembled at KVM — where DT Dobie has a 32.5 per cent stake — going forward. Assembly of VW vehicles also marks a return of the German automaker to local production after pulling out in 1977.
The multinational used to assemble VW vans, microbuses and the famous Kombi. Local assembly is largely boosted by the exemption of vehicle parts headed for assembly plants from the 25 per cent import duty levied on fullybuilt cars, resulting in a price advantage.
Dealers say the recent move by the government to scrap a 20 per cent excise tax on locally assembled vehicles could see an increase in local production.
The Kenya Revenue Authority (KRA) had started collecting excise taxes from KVM, General Motors East Africa (GMEA) and Associated vehicle Assemblers (AVA) for the first time last year at a flat rate of Sh150,000 per vehicle.
The levy was raised to 20 per cent of a vehicle’s value in June, sparking protests from the assemblers who said the move had led to job cuts and reduced sales.
Mr Kenyatta said his administration is committed to growing Kenya’s industrial base through investing in infrastructure and enacting progressive policies.
Kenya, however, still trails major markets like South Africa that has developed a vibrant automotive manufacturing industry on a raft of incentives and a large internal demand for new vehicles.