Simba Corporation buys out Marshalls in key vehicle assembly plant

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Simba Corporation is set to take full ownership of Mombasa-based vehicle assembly plant;  Associated Vehicle Assemblers (AVA) after it received governments approval to acquire 50 percent stake by its partner; Marshalls East Africa.

The assembly plant is currently owned on a 50/50 basis by Simba and Marshalls.

Competition Authority of Kenya (CAK) has said it has granted Simba conditional approval to “acquire control” of the vehicle assembly firm. “We are buying the 50 per cent stake we don’t already own from Marshalls East Africa… They (Marshalls) are currently not active in the automotive business so we decided to take over the whole thing,” Simba’s chief executive Adil Popat has said.

AVA is one of two firms that offer motor vehicle assembly services on a contract basis. The approval from the regulator has come with conditions with the regulator ordering Simba to keep AVA open to other companies and to honour all existing contracts.

“The conditional approval was informed by the fact that the transaction would likely raise competition concerns in market for the assembly of commercial motor vehicles… based on this the authority cushioned the third party brands and any other competing brand from being locked out of the plant as long as capacity exists,” said the CAK.

Mr Popat said that although Simba has not finalised a strategic plan for AVA, the intention is to bring in more clients to assemble their vehicles at the plant, with the company planning to make additional investments to improve the facility.

Associated Vehicle Assemblers Ltd engages in assembling of motor vehicle which include trucks. The company was founded in 1977 and is based in Mombasa, Kenya. Associated Vehicle Assemblers Ltd operates as a subsidiary of Marshalls East Africa Ltd.

Current clients include Toyota Kenya and dealers of Scania and Tata brands. Volvo Trucks has also indicated plans to set up a Sh2.5 billion production line at AVA next year.

In 2013, Toyota Kenya invested Sh500 million in a truck and bus assembly plant complete with a new showroom to improve marketing. The Japanese auto maker launched the assembly with the first Hino truck and bus rolling off the plant in Changamwe.

Government incentives have helped boost vehicle production in Kenya with more than 10,000 finished vehicles assembled there last year, according to the Kenya National Bureau of Statistics.

Its Economic Survey 2016 reported a 6.8% rise in 2015 compared to the previous year in Kenya’s production of cars, trailers and semi-trailers. This includes a 7% rise in the number of motor vehicles assembled there, from 9,514 to 10,181 vehicles; a 13.2% hike in production of trailers and semi-trailers; and a 1.3% increase in terms of motor vehicle bodies.

Government incentives that have helped boost production include an exemption on imported parts for assembly from the 25% import duty that applies to finished vehicles. Last year, the government also guaranteed a minimum of 40% of the state’s annual vehicle leasing contracts would go to Kenyan motor vehicle assembly firms.

In 2010, the Kenyan government introduced a motor vehicle leasing policy for all automotive acquisitions in place of outright purchase, to reduce upfront acquisition costs and keep spiralling maintenance costs in check.

In 2014, state agencies leased in the region of 3,000 vehicles, though at that time no distinction was made between locally assembled and imported units. In 2015, however, the Treasury announced it would establish structures for better motor vehicle fleet management, covering both leased and government-owned motor vehicles, suggesting this was “expected to encourage motor vehicle assembling, support growth of backward and forward industries, boost the secondary market of vehicles and generate additional employment opportunities”.

Vehicle manufacturers including Associated Vehicle Assemblers (AVA), General Motors East Africa and Kenya Vehicle Manufacturer (KVM) have all reported that there is sufficient capacity for yet further increases in assembly there.

Meanwhile, the government is currently trying to curb the number of imported second-hand vehicles. In December, the Treasury introduced a $2,000 excise tax for vehicles more than three years old with a $1,500 tax for newer ones.

In March this year, Daimler Trucks Asia began assembly of its Fuso range of commercial vehicles at a plant in Mombasa, Kenya, with its local partners Simba Colt and Associated Vehicle Assemblers.