Swedish auto maker deepens reach with local buyout

Scania Group announced it had bought out a Nairobi-based firm, Kenya Grange Vehicle at an undisclosed price as it seeks to deepen its reach in region.

The move by the Swedish firm is meant to gain foothold in East African community whose vehicle market has been growing.

Scania has announced it has injected Sh2.4 billion million in Kenya Grange Vehicle to bring it upto to speed and will start its services next month.

"This is a long term commitment to Kenya and East Africa. The market provides great opportunities and challenges for the transportation industry," said Scania Vice President Trucks Christopher Podgorski.

The buyout comes at a time when both local and foreign firms have shown increased appetite for smaller industry players to consolidate their positions in the market. Meanwhile German car maker Volkswagen has made a bid to take full control of Scania.

Kenya Grange was the sole franchise holder for Scania trucks and buses and provided a range of back-up services including dependable parts supply, comprehensive service and repair support, fleet management systems as well as driver and mechanic training.

Scania joined the local market in 1987 in Industrial Area, before widening its presence in Nakuru and Mombasa. The Kenya business runs under Scania East Africa Limited.

Scania is a global company with operations in Europe, Latin America, Asia, Africa, and Australia.

“We will offer various forms of service solutions that ensure Scania vehicles used by our customers are always repaired correctly and with the right parts and generate the best uptime and fuel consumption,” said the regional managing Director Per Holmström.

Sales of commercial and public transport vehicles such as pick-ups, trucks and buses accounts for 40 per cent of the industry, buoyed by increased demand in sectors such public transport, haulage and agriculture.

The buses and trucks business in Kenya is dominated by established players such as CMC, General Motors, Simba Colt and DT Dobie.

Over the past two years, global firms have shown interest in putting assembly plants in Kenya because of the tax incentives, and the regional growing economy.

In Kenya, local vehicle assemblers benefit from tax incentives on import of completely knocked down units (CKD) — the parts needed to assemble a vehicle — as they are zero-rated as opposed to 25 per cent import duty on vehicle imports.

Last year Toyota joined the list of commercial vehicles assemblers with Hino buses and trucks. Other players in the segment are India’s Tata and China’s Foton.

Hino and Mitsubishi (from Simba Colt) are assembled at Mombasa-based Associated Vehicle Assemblers (AVA).

Other assembling joints include Kenya Vehicle Manufacturer (KVM), based in Thika, used mostly by CMC and DT Dobie for their Mercedes, Mazda and Iveco brands.

Kenya’s vehicle assembly plants have an installed capacity of over 30,000 vehicles, meaning capacity utilisation presently stands at about 20 per cent.