Withdrawal of General Motors from Kenya to Affect Country’s Economy

The exit of U.S auto dealer General Motors from Kenya will negatively affect the Kenyan economy. The company came into the country and into Africa at large in 1977 with an assembly plant for vehicles. The rising demand of vehicles and luxury cars in the past few years has seen more people buy new and used motor vehicles in Kenya. This has been due to robust construction and energy sector development along with continued growth in tourism despite Kenya’s engagement in counter-terrorism war in neighboring Somalia.

East Africa in general has had its fair share of comprehensive deals which were finalized in October 2015 between the European and the East African community as demand for European vehicles in the EAC countries grew. This agreement boosted trade in automobiles and spare parts between the two regions. Tariffs on EU exports to markets in Kenya, Burundi, Rwanda, Tanzania and Uganda was phased out under the pact which saw 80% of EU-made goods sold to the region.

Auto dealer General Motors has been the major investor in the Nairobi assembly plant for Isuzu buses, pick-ups and trucks. The plant produces the largest number of vehicles in the country ahead of the Thika-based Kenya Vehicle Manufacturer (KVM) and Mombasa-based Associated Vehicle Assemblers (AVM). The company has had more sales over the years which widened its lead over the top rival Toyota East Africa.

GMEA, whose market share currently stands at 31.5 percent, has posted a 30 percent drop in sales last year. Its sales are 90 percent driven by Isuzu brands.

There has been a slowdown in the market which is mainly driven by the capping of interest rates which weigh down on customers access to loans. Another challenge is the general liquidity in the market. This will also lead to a loss of jobs which will affect individuals and the country as a whole.

General Motors has been a major investor in the Kenyan manufacturing sector over the last four decades contributing immensely to the country’s automotive industry and economy. With its withdrawal Kenya should expect to feel a pinch in the economy.

Related: EAC Manufacturers Network meet to discuss Regional Challenges

Written by Amina Martha.