August 1, 2018 / 1:55 PM / 4 months ago

Isuzu finds used car habit curbs East African industry growth

NAIROBI, Aug 1 (Reuters) - Secondhand Asian imports are the biggest challenge to the growth of car manufacturing in East Africa, an executive at Japan’s Isuzu, which is trying to tap into its emerging middle class, said on Wednesday.

With some of the continent’s fastest growing economies, carmakers including VW and Volvo, are setting up plants in the region in an effort to lure drivers in countries such as Kenya and Rwanda away from used cars.

New vehicle sales in East Africa average less than 15,000 out of a total of 200,000 sold annually, said Rita Kavashe, managing director of Isuzu East Africa, adding that this was due to a preference for upmarket used cars to new, lower-end ones.

Other brands assembling vehicles in Kenya include Toyota , Nissan, Mitsubishi and Peugeot .

“If someone has 4 million Kenyan shillings ($39,841), they might decide to, instead of buying a sedan, saloon vehicle for 3.5 million ... aspire for higher class,” she said.

“So they will go and get may be a second hand Prado (SUV), because it’s big,” she told Reuters in an interview.

Isuzu Motors acquired 57.7 percent of General Motors’ East African unit last year, becoming Isuzu East Africa, a subsidiary of the Japanese vehicle maker.

The company said the unit will focus on expanding sales and improving after-sales services.

Kavashe said East Africa needs to have standardised regulations on used car imports and that if governments adopted policies favouring new vehicles that will represent “a big opportunity”.

Isuzu mainly sells commercial trucks and operates a plant in Nairobi assembling 4,000 vehicles a year. These are then shipped to authorized dealers in the region.

Infrastructure development in Kenya and Tanzania, and the nascent oil and gas sector in Uganda are offering potential demand for Isuzu trucks, Kavashe said.

Governments are Isuzu’s biggest customers, she said, accounting for about 40 percent of its sales in the region.

Isuzu also plays a small part in the passenger segment, where it is offering a 7-seater SUV called Isuzu mu-X.

“As the middle class continues to grow they are going to prefer to buy new vehicles,” she said. “But mostly we see more corporate buyers, they are buying for their managers.” ($1 = 100.4000 Kenyan shillings) (Reporting by Omar Mohammed; editing by Elias Biryabarema and Alexander Smith)

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