Kenya is intensifying its endeavors to attract foreign investment, particularly in light of the African Continental Free Trade Area (AfCFTA). With ambitious goals to double manufacturing output, notably in the automotive sector, Kenya has forged significant partnerships with Japanese companies, including the renowned Toyota Tsusho Corporation.

Strategic agreements in favor of renewable energy

On February 7, 2024, Kenyan President William Ruto took to his official X account to share news of a significant development. He announced the signing of a framework agreement between Kenya and Toyota Tsusho Corporation. President Ruto detailed his attendance at the signing ceremony held in Tokyo, Japan, where discussions centered around collaboration between the two entities. Following the signing, President Ruto visited the Toyota Motamachi plant. These strategic agreements with Japanese firms, including Toyota Tsusho Corporation, hold the potential to infuse approximately 620.7 million USD into Kenya’s green energy and automotive sectors.

Strengthening efforts in energy transitions

Kenya, renowned for its robust renewable energy portfolio, currently harnesses nearly 90 % of its renewable resources, with a determined goal to achieve full utilization by 2030. To realize this vision, the country is strategically exploring untapped sources such as geothermal, solar, and wind energy.

President Ruto has unveiled a series of pivotal agreements, signaling significant investments in Kenya’s renewable energy sector:

• Meru Wind Farm : A substantial investment of USD 94 million is earmarked for this project.
• Isiolo Solar Farm: Another vital initiative, the Isiolo Solar Farm, is set to receive 50.2 million USD in funding.
• Menengai Geothermal Power Plant : With a focus on harnessing geothermal energy, an investment of 470.22 USD million is allocated to this project, alongside initiatives aimed at promoting electric vehicles.
• Kenya Vehicle Manufacturers (KVM) Assembly Plant : Recognizing the importance of sustainable transportation, 5 million USD is allocated to the establishment of the KVM assembly plant in Thika.

These investments underscore Kenya’s commitment to sustainable development and its ambitious targets in renewable energy utilization.

Boosting local car production

Kenya boasts a storied automotive industry dating back to the 1970s, comprising both multinational-owned assembly units and locally-driven production endeavors. However, despite its rich heritage, the market is predominantly swayed by imports, chiefly from Japan. Statistics reveal a significant influx, with the country importing between 7,000 to 10,000 units of Japanese models monthly, constituting a staggering 80 % of Kenya’s total national car fleet.

Partnership between Toyota and Kenya

In a bid to revitalize Kenya’s automotive sector, the local government has inked a significant agreement with Toyota, paving the way for the establishment of an assembly line within the country. President William Ruto has articulated his vision to render locally manufactured vehicles more accessible, aiming to curb the influx of imported used cars inundating the Kenyan market.

The agreement materializes into an initial investment of $5 million in Vehicle Manufactures Limited’s Thika plant. This initiative arrives amidst Kenya’s endeavor to strike a balance between imported automobiles and domestic production.

President Ruto further emphasizes the delegation’s backing for Toyota’s proposed installation of a vehicle manufacturing plant, aimed at meeting the escalating demand for its products. He notes positive strides in ongoing discussions regarding this venture.

Conquering the African automotive market

The automotive market in Africa is witnessing a surge in demand, with projections from Mordor Intelligence’s report “Analysis of the size and share of the automotive market in Africa” indicating substantial growth. By 2024, the market is anticipated to encompass 1.41 million units, valued at USD 20.53 billion. Looking ahead to 2029, these figures are set to escalate to 1.89 million vehicles, with a market value reaching USD 26.38 billion.

This optimistic forecast is underpinned by proactive government initiatives aimed at catalyzing market expansion. Notably, Nigeria and Kenya are at the forefront, implementing policies conducive to business growth. Kenya’s automotive policy, for instance, targets the amplification of automotive exports to East Africa, leveraging taxes on imported vehicles. Similarly, Nigeria is enacting a significant measure comprising a 70% import duty and taxes on imported cars. This strategic move is poised not only to bolster local production but also to stimulate domestic consumption, thereby propelling the automotive sector forward.

AfCFTA automotive industry race

Since the implementation of the African Continental Free Trade Area (AfCFTA), Kenya has set its sights on doubling its manufacturing output, with a particular emphasis on the automotive sector. Local automakers are scaling up their production efforts, taking cues from the pioneering efforts of Mobius Motors, which was founded in Kenya back in 2010. By the year 2024, this Kenyan enterprise aims to achieve annual sales of 1,000 vehicles, thereby bolstering the country’s standing within the automotive industry.

In a bid to uphold product quality within the market, Mobius Motors prioritizes the utilization of local raw materials. The company actively encourages the emergence of local suppliers, provided they can deliver large quantities of the requisite parts. Additionally, the Kenyan company is keen on fortifying its position by customizing chassis and shock absorbers to suit the unique characteristics of Kenyan and African roads.

The opportunities presented by the AfCFTA have also piqued the interest of foreign manufacturers. In 2022, Mitsubishi made headlines with its announcement to recommence manufacturing activities in Africa, marking an 11-year hiatus since the closure of its plant in South Africa. By establishing a production unit in Kenya, the Japanese automotive giant aims to carve out a significant presence in the African market, capitalizing on the elimination of customs duties facilitated by the AfCFTA agreement.