JV gears up to enter the East African market

During the launch of the affiliate company in Kenya last year, Wang Guangjun, the vice-general manager of AVIC International Beijing Co Ltd, and chairman of AVIC-JAC Motors (E.A) Ltd, said the scale of the light-truck market in Kenya increased by 33 percent last year to reach 6,100 units, a feat that was only fourth after Algeria, South Africa and Egypt.

Lu said the company is focused on providing just a few models initially so as to better provide after-sales service to customers in terms of countrywide parts through their network of dealers.

Currently, the company has dealers in Kisumu, Eldoret and Nakuru to provide customers with spare parts wherever they may be in Kenya.

At the moment, they are only offering the N48 and L75, both 2.5 ton trucks, as well as a 4 ton and 7 ton truck. Lu said they will slowly introduce the prime mover, a heavy duty truck, and tipper, a dump truck that can lift its hinged box and dump its contents, when the company gains a firm grip on the market.

"We are focused on providing quality to our customers. Therefore, we will not be confusing customers with too many models in the market. After establishing ourselves in the market, we will set up an assembly line and provide several other models with different technologies.

"We are offering very competitive introductory prices for our trucks. We have also partnered with two local banks, NIC and Chase banks, to offer our customers 100 percent financing for both purchases and leasing."

Apart from the two banks, the company also has a partnership with Alios Finance, a pure financing company, to provide customers with a variety of financing options.

Lu said the company is mainly targeting logistics companies, bakeries, factories, wholesalers, farmers and delivery companies as potential customers for their light trucks.

Already other Chinese truck companies such as FAW Group, Foton Motor Inc and Sinotruck International Inc are competing in the Kenyan market for the growing construction industry business. Lu, however, said construction companies, and he singled out China Road and Bridge Corp, have not shied away from light trucks as they also provide necessary services such as staff transportation.

Foton East Africa has set up the biggest assembly plant in East Africa on the outskirts of Nairobi and is targeting the construction sector. The plant can produce 10,000 trucks a year.

While Foton and the other truck manufacturing companies are importing complete knock-down kits, which need to be assembled locally, Lu said AVIC-JAC Motors East Africa is importing assembled trucks.

"We do not take advantage of the tax exemption on locally assembled units as we import fully assembled trucks. This is to ensure that quality standards are maintained as the units are fully assembled using machines in China," he said.

The Kenya Revenue Authority imposes a 25 percent import duty on all vehicle imports, while exempting CKD units. The measure is aimed at protecting the local vehicle manufacturing industry from cheap imports.

Depending on the market response, which Lu said is looking promising, they will be aiming at expanding into the wider East African market, which includes Tanzania, Uganda, Rwanda and Burundi, by setting up regional production, sales, service and parts centers.

The company has sold an average of eight to nine vehicles monthly since December, with the biggest deal being with global soft drinks company Pepsi-Co EA Ltd this year. The company leased 10 trucks in the first phase of its fleet improvement project. Lu expects the company to place more orders this year.

Since President Uhuru Kenyatta's government took power in 2013, it changed its transport policy from buying to leasing all government vehicles. The government leased 1,200 vehicles for the National Police Service in October 2013. Most private companies have since followed the cost-cutting policy to save on initial as well as maintenance costs.

With a total work force of 13, of whom 10 are locals, Lu said AVIC-JAC Motors East Africa has been continuously training local staff on technical aspects of truck maintenance. This is done once a week for two hours.