April 12, 2019 / 7:01 AM / 10 months ago

Home market still a dream for African carmakers

* Home-grown carmakers hope for slice of huge African market

* Global car giants also making a push in Africa

* Local firms face same obstacles but lack finance, infrastructure

By Duncan Miriri

NAIROBI, April 12 (Reuters) - Since its launch in 2014, Mobius Motors, Kenya’s only home-grown automaker, has only produced around 50 test vehicles.

Mobius is among a number of African firms hoping for a slice of the continent’s largely underdeveloped market for new cars.

As global car giants, including Japan’s Toyota and Germany’s Volkswagen have stepped up efforts to tap the vast market, local players including Kiira Motors of Uganda, Ghana’s Kantanka and Nigeria-based Innoson Motors, are also making a push.

They face the same obstacles as their big-name peers, notably the dominance of cheap second-hand imports, but without the deep pockets and infrastructure to overcome them.

“It is not an easy journey to be on,” said Joel Jackson, the 34-year old London-born founder of Mobius Motors.

He first dreamt of building a car in Africa for African drivers a decade ago when he travelled across Kenya for his job with a forestry company.

Mobius produces a boxy, no-frills SUV designed for both the challenges of Africa’s rugged driving conditions and the modest budgets of African consumers.

The entry-level version is priced at 1.3 million shillings ($12,897), half the going rate for a second-hand SUV model imported from Japan.

And though prospective customers have placed more than 400 orders, paying a $300 advance on their cars, Jackson is still crisscrossing the globe to raise financing for a full production launch that is already nearly a year behind schedule.

“A large chunk of the money is going into production operations but equally there is a lot of investment in the research and development of the vehicle itself,” he said.

Nigeria’s Innoson is fairing a bit better, selling 10,000 vehicles in its first eight years of operations, according to its website.

Kiira, which is 96 percent state-owned, is building a $40-million assembly plant in southern Uganda that will have the capacity to produce 5,000 cars per year. But the company has built just three prototype vehicles since 2011.

Rodney Muhumuza, Kiira’s business development manager, said while the company was benefiting from state support, it would require private equity at some point. The biggest challenges at the moment, however, are policy-related, he said.

Total auto sales in the East African Community - a common market including Kenya, Uganda, Rwanda, Burundi, Tanzania and South Sudan - are on track to double to 500,000 vehicles per year within the next decade, he estimates. And he wants them to be new, locally built cars.

But to make that happen, governments must unite to favour domestic production by curbing cheap second-hand imports from countries like Japan and harmonising tax rates to keep down the prices of vehicles produced in neighbouring countries.

“If there can be fiscal and non-fiscal incentives within the region to really facilitate local value addition ... that will be great,” he said. “That is really a very good market.” ($1 = 100.8000 Kenyan shillings) (Editing by Joe Bavier and Anna Willard)

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