American automaker General Motors has exited the East African market after selling its entire stake in General Motors East Africa (GMEA) to Isuzu Motors Ltd of Japan, in a move that has brought into focus policies on used vehicle imports.
GM leaves just as the region is witnessing the re-entry of leading European brands Volkswagen and Peugeot, which have set up assembly plants in Kenya.
Nairobi has said it is rethinking policies on secondhand vehicle importation to protect investors assembling new cars in Kenya.
With more than 10,000 used cars being imported monthly, assemblers of new cars are struggling to push units, managing to sell a paltry 13,869 new cars in 2016, according to available data.
“Secondhand products are the biggest threat to our industrialisation plan,” said Kenya’s Industrialisation Cabinet Secretary Adan Mohamed. “For us to grow industries, we must phase out these old activities, but in a calculated manner.”
GM said selling its 57.7 per cent stake in GMEA was a “natural next step,” but analysts say that the influx of used vehicles played a role in its decision to quit a market it has dominated for over 40 years.
“We are responding to a request from Isuzu, which will enable it to be fully integrated into the company and apply more focus on its brand,” said GMEA chairman and managing director of GM Africa and Middle East Operations Mario A. Spangenberg.
Market pressure
Other shareholders have retained their current shareholding. These are Kenya Industrial and Commercial Development Corporation with 20 per cent, Centum Investments with 17.8 per cent and Itochu Corporation with 4.5 per cent.
While GM’s exit was unexpected, coming at a time when European and Japanese automakers are expressing renewed optimism about the region, signs that the company was feeling the pressure in markets outside its core North American market have been emerging.
The US, Canada and Mexico remain the key markets for the Detroit-based manufacturer, with interest from China growing steadily in recent years. In 2015, the company sold 7.3 million units in North America and China.
GM has been facing challenges in Europe, and is contemplating a complete exit from the continent, where it is making massive losses.
It managed only 1.1 million unit sales in the region in 2015, when it also exited the Russian market.
The situation has been worse in Africa and the Middle East, where in 2015, the company merged its operations as part of international operations restructuring, but sales remain below 400,000 units.
Africa remains a difficult market
Although GM has repeatedly stated that Africa is a growth market — particularly Egypt, South Africa and Kenya — across the continent, it has largely been surviving on the Isuzu brand after its mass market brands Chevrolet and Opel failed to make an impact. And while the Isuzu brand has kept the company in business, particularly in Kenya where it accounts for about 95 per cent of the sales, the entry of other light and heavy commercial vehicle brands has resulted in an increasing competition and a decline in sales.
According to the company’s 2015 financial results, Africa remains a difficult market due to lack of political stability, decreasing prices of natural resources and foreign-exchange volatility.
In Africa, the company’s total unit sales have averaged 180,000 over the past five years, with South Africa and Egypt remaining its key markets in terms of unit sales.
In East Africa, Kenya was the biggest market with the company selling 6,690 units in 2015, and 4,858 units last year.
Early this month France’s PSA Group, the maker of Peugeot, Citroen and DS cars, announced it would start assembling two Peugeot models in Kenya to reduce its dependence on European sales.
Last year, Volkswagen also started assembling the VW Polo Vivo in Kenya, aiming to produce up to 1,000 vehicles per year.
Source: theeastafrican
