Volkswagen returns to Kenya after four decades | Business| Economy and finance news from a German perspective | DW | 08.09.2016
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Volkswagen returns to Kenya after four decades

The German carmaker has announced it will resume producing cars in Kenya by the end of the year, in a partnership with a local automaker aimed at selling more cars across Eastern Africa.

Kenya is back in the business of assembling vehicles after Volkswagen South Africa on Wednesday signed a deal with the Kenyan government aimed at establishing an assembly plant in Thika - an industrial town northeast of the capital Nairobi.

VW South Africa said in a statement it would assemble its popular Polo Vivo model there, in collaboration with local carmaker Kenya Vehicle Manufacturers (KVM), in which the government is a major shareholder.

Volkswagen South Africa chief executive Thomas Schäfer noted that the world's biggest carmaker by numbers believed in Kenya's potential to develop "a very big fully-fledged" automotive industry. "The East African Community has got the potential, and today is the first step in this direction that we want to take with our passenger cars," Schafer said.

Growth market?

Volkswagen's return to Kenya comes more than four decades after the German auto giant stopped production in the country in the 1970s. It will join other brands already operating in Kenya, including Isuzu, Toyota, Nissan and Mitsubishi.

According to VW, it was planned to initially assemble up to 5,000 Polo Vivo models, making Thika the carmakers third production site in Africa, after South Africa and Nigeria.

After meeting VW executives in Nairobi on Wednesday, Kenyan President Uhuru Kenyatta said: "I am happy to welcome back the Volkswagen Group, currently the largest car manufacturer in the world, back to Kenya."

Even though VW hopes to boost its sales across the East African region, Kenya's car market is dominated by low-priced second-hand imports from countries such as Japan. Kenya itself mostly assembles trucks, pick-ups and buses from kits supplied by foreign manufacturers.

Data from the Kenya National Bureau of Statistics have shown, however, that the number of vehicles assembled between January and April was down 31 percent year-on-year to 2,258 vehicles. VW's partner KVM has attributed the slowdown to tough economic conditions for buyers, including high interest rates and cuts in government spending.

Neither the Kenyan government nor VW said how much the German carmaker would invest in Thika and what the plant's full production capacity would be.

uhe/ tko (Reuters, dpa)

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