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Driving Force

Updated: 2013-04-19 11:16
By Zhong Nan ( China Daily)

 Driving Force

Driving Force
Above: Workers at an assembly line of Chongqing Lifan's Ethiopia branch. Below: Guo Lei, general manager of Foton East Africa Ltd, with a customer. Feng Yongbin / China Daily

Shide says Africa needs to become a lot wealthier before it can become a thriving market for global automobile brands such as Audi, BMW or Volkswagen, but the current market offers benchmarks for Chinese carmakers to progressively move from selling cars to governments to selling them to individuals.

Lifan has 3,300 vehicles on the roads of Ethiopia and Djibouti, and says it expects its sales to rise 30 percent this year. Last year it imported 895 vehicles from China and sold 735 of them, 95 more than Toyota, which imported 800.

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Another Chinese carmaker doing well in Africa is Zhejiang Geely Holding Group, the parent of Volvo Car Corp. Last year it shipped more than 30,000 cars to the continent, more than triple the number in 2011. The company is now selling autos to seven countries in Africa, including South Africa, Nigeria, Ghana and Algeria.

Beiqi Foton Motor Co, the biggest commercial vehicle maker in China, in terms of sales, has delivered more than 10,000 vehicles in Africa since 2003 and last year had turnover of more than $220 million here.

Sitting in a noisy cafe in Ngong Road, Nairobi, Guo Lei, general manager of Foton East Africa Ltd, says that as is the case in most African countries, where new cars are beyond the reach of most people, in Kenya second-hand vehicles command a large share of the market; in East Africa the proportion is 70 percent.

As in Britain and Japan, cars in Kenya are right-hand drive, so many cars there are used ones from those two countries.

The disadvantage of such a big second-hand market is that the brand life of some cars can be as long as 20 years, and anyone with one of the old models can face problems in obtaining spare parts. For example, Japanese carmakers, the main source for second-hand vehicles in Africa, have stopped producing spare parts for some models from the 1990s.

"Kenya is a price-sensitive market," says Guo, 33, who gained a master's degree in international trade at Nelson Mandela Metropolitan University in South Africa seven years ago.

"Consumer trends here indicate that buyers go for vehicles they know they can buy spare parts for in the nearest town.

"This is a new market growth point for us, because we can provide spare parts in sufficient quantities and technical services on time. We might be young in this market, but we are quick learners and have gradually moved the industrial chain to this market."

As private investment in Kenya is diversified and encouraged, an increasing number of Kenyans are keen to take out bank loans to set up small, independent transport businesses, and after buying vehicles they cannot afford downtime because of mechanical breakdowns.

In such circumstances, Guo says, being able to supply spare parts is a critical selling point for anyone in the market.

Last year the Beijing company spent $50 million to build an assembly plant in Nairobi, deftly killing two birds with one stone: moving closer to the market and avoiding having to pay duty of 25 percent.

The plant is aimed at serving the fast-growing market for pickup trucks and light commercial vehicles in East Africa, with which it can supply spare parts and 10,000 vehicles a year.

Construction work was completed in January, and the assembly plant is due to open in June. It is in the process of recruiting 500 employees in Nairobi alone and will soon put together an additional sales team of 120 across East Africa. A group of 10 Chinese technicians and sales experts arrived in Kenya in February, and the company has set up a team of technicians and equipped four vehicles to respond to emergency calls on the road.

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