Automakers May Impact East African Market


Automakers May Impact East African Market

Automobile factories are sprouting across East Africa – developing a new industry for the region. Lubricant industry insiders expect it to increase lubricant consumption and to speed adoption of higher quality engine oil, sources said, but they disagree on the amount of impact and pace of change.

Kenya is considered one of the most attractive destinations for car manufacturers, with several companies announcing plans to expand there. Last year PSA Group and Urysia entered into an agreement to assemble Peugeot brand vehicles in Kenya. The Thika plant, located outside Nairobi, began production in January, and it is expected to manufacture 1,000 Peugeot 508 and 30008 model vehicles annually.

Photo: LeoLee/iStock

A variety of vehicles is shown on a local road in Kenya. Several car manufacturers have announced plans to expand vehicle assembly operations in countries in East Africa, including in Kenya, where Toyota, Nissan and Mitsubishi each have assembly plants.

Several other automakers – including Toyota, Nissan and Mitsubishi – have car plants in Kenya. The total production of cars in the country was estimated at 10,000 units per year in 2017, according to the Kenya Vehicle Manufacturers Association.

The increasing presence of original equipment manufacturers in the region has the potential to influence lubricant consumption patterns, depending on OEM recommendations for engine oil selection.

Irfan Khan, General Petroleums general manager for Tanzania operations, believes the increasing presence of OEMs in the region will result in higher grade oils, especially synthetic lubes. First, we are very proud of the progress in auto manufacturing, and I am fully confident that it will create a need for higher quality oil, especially the synthetic segment of lube market, and these same manufacturers will invest and educate the buyer about recommended or approved oil or lubricants, said Khan.

While acknowledging that the presence of original equipment manufacturers will spur demand for better quality engine oils, Mehrdad Vajedi, director for United Arab Emirates-based Permian Energy, noted that the change may be hindered by the slim purchasing power of most people in East Africa. He anticipates that changes in consumption patterns still wont happen fast.

It will be a gradual change in customer habit[s] in selecting oil and maintaining [vehicles] under the warranty period, he said. Similar experiences in other countries suggest that people will not want to be restricted to [the] original equipment manufacturers recommended service station due to cost and will normally want freedom of choice.

[East] African countries register around 90,000 to 95,000 vehicles per year and, when measured in relation to the small scale of manufacturing capacity announced for the region, I do not think the impact would be much. Even in South Africa – where the presence of OEMs and higher quality engine oil standards are long established – mineral and high viscosity oils are still on the market, showing that consumption patterns can change slowly. Because of this, Vajedi believes there wont be immediate transformation in East Africa either.

James Mutisya, lubricant sale manager for Kenolkobil in Nairobi,Kenya, believes more auto factories in the region will not make a significant difference because most lubricants consumed in the country are produced there.

Other countries in East Africa are also expecting auto factories to open this year. German car maker Volkswagen will open its first vehicle assembly plant in Kigali, Rwanda, in June, Stefan Mecha, director of sales and marketing, told a reporter. The plant, located in Kigalis Special Economic Zone, will produce 1,000 vehicles in its first year of operation, with goals to ramp up production in the future.

Kiira Motors Corp. and Hyundai are collaborating and will start producing vehicles in the Nakaseke district of central Uganda later this year. The companies estimated that the new vehicle plant will start production with 305 units per year and ramp up production to full capacity of 60,000 vehicles per year by 2039.

Related Topics

Africa    Finished Lubricants    Region