In the first piece of this three-part series that featured last week under the title “Kiira Motors & the Nascent Automotive Industry in Uganda (Part 1), we posed the question: Is Uganda is manufacturing or merely assembling vehicles? In today’s Part 2 of this series, we attempt to answer this.
In one of the brochures at Kiira Motors Corporation headquarters in Kampala, the company promises to become an automotive Original Equipment Manufacturer (OEM) with the capacity to develop, make, and sell motor vehicles and components and participate in adjacent businesses.
What this means is that in the near future, the plant will be manufacturing parts and other car accessories beyond just vehicles in order to support the growth of a self-sustaining automotive industry in Uganda.
Why is Kiira this ambitious?
That answer is in the nature of the lucrative global automotive industry. That industry accounted for a market size of about USD 5.4 billion in 2020 and is projected to grow to USD 9.3 billion by 2025. Given that in the same year, Africa’s demand for vehicles is likely to hit 10 million units, Kiira is making the gamble but it a right and bold decision. By planning to manufacture equipment and vehicle components beyond just vehicle units, the plant might be the sole supplier of whatever car parts in this region once it has the clearance of other manufacturers like Toyota. This is because global sales of automobiles are forecast to hit just about 70 million units in 2022 though they had picked at 80 million units before the COVID 19 pandemic, according to stastista.com. But whatever the case, they will need a steady supply of parts and accessories.
Thus, when I travelled to the plant in Jinja City some two weeks back, one of the biggest questions on my mind, and for which I wanted answers, was whether the facility is manufacturing or merely assembling vehicles and whether it will have the capabilities to make car parts and accessories locally. It is the same question most of its critics on social media keep asking. And they are partly right. They need answers. Particularly, opponents of President Yoweri Museveni tout this question around to discredit any of his achievements. Their problem is not because it is bad to assemble a vehicle from here. It is just that by assembling the buses at Kiira, Uganda is not adding any value in as far as this project is concerned. These too need credible answers.
Before we get to know what Kiira is doing, let’s take some few examples from around the world. The familiar one is Toyota. The Japanese car maker has one of its largest franchises in the US market where only about 60% of the components used are locally produced. This leaves 40% sourced from elsewhere. But this doesn’t mean the US is not benefiting economically just because some of the components constitute ‘assemblement.’ Furthermore, Toyota is leading in the adoption of hybrid vehicles whose lithium metal-oxide batteries and other power components are supplied by Tesla Motors.
The other good example is Apple. The technology company neither makes nor assembles the iPhone in the strict sense of word. According to Forbes.com, an iPhone has parts that come from several manufacturers, one of which is Samsung. But this hasn’t stopped Apple from ranking as one of the world’s most valuable companies worth $2 trillion 3 months ago. The mineral raw material Tantalum from Coltan that is used to manufacture tantalum capacitors which are used for mobile phones, personal computers, automotive electronics, and cameras, is picked from the Democratic Republic of Congo and not from the countries manufacturing these computers and phones.
What these examples tell us is that building, assembling and manufacturing are normal processes in any industry. It doesn’t imply that when one is assembling a bus, one is not adding value to the automotive industry.
At Kiira, I have discovered an interesting dynamic to this. Metal components that make up for the vehicles, are being fabricated, bent, machine-worked and wielded from there. This processes constitutes what I would safely call ‘a vehicle building process.’ This is because buses at Kiira are essentially being built not assembled in the real sense that we probably have been imagining. We probably have a mix of the three processes- building, assembling and manufacturing. I am yet to find the appropriate word for this cocktail but what is happening a typical engineering process.
The Ugandan engineers at the site told me it is true some of the materials are imported, just like what is happening at Toyota and Apple. But that it is what you make out of them that matters most. What is happening at Kiira is called Technology Transfer which is a normal occurrence when one is starting to develop an automotive industry. They gave me an example of TATA whose first trucks were built from a technological collaboration with Mercedes Benz. Kiira is currently having the same arrangement with Synomac, CHTC, among others, which are both Fortune 500 companies.
What is of critical importance is that, Kiira is relying on local brain content to build something that is aligned to our conditions and needs. The process has adequately localized our local content capacity by feeding into local companies involved in paint, leather furniture seats, plastics and battery manufacturing. A plan is also underway to ensure that by 2030, 60% of the raw materials needed to build pickup trucks, sedans and buses are local.
By 2040, if Vision 2040 is anything to go by, Uganda shall have an elaborate steel industry able to process the more than 2.6 million metric tons of iron ore located in western Uganda. This will localize the industry better and integrate it with the rest of the economy.
While the issue of assembly remains an eclectic contest amongst many critics, the fact is that the reality of automotive industrialization is a globalization process that is collaborative in nature in order to produce products cheaply and smartly.
In the third and final part of this series coming up next week, we shall look at what opportunities await us from the Kiira Motors Corporation.
Contact: [email protected] Twitter: @RugyendoQuotes