Auto-ancillary industry in Kenya the study of the manufacture of leaf spings, exhaust systems, filters, radiators brake pads and batteries

Abstract

The domestic production of auto-ancillaries (motor vehicle components) in Kenya is an import-substituting strategy aimed at increasing the domestic content of the locally assembled vehicles as well as to offer maintenance services to the already existing vehicles. This study investigates the problems facing the auto-ancillary industry especially the firms manufacturing leaf springs, radiators, exhaust pipes and silencers, brake pads, filters, and batteries. The issues investigated relate to capacity utilization, economies of scale, protection and export promotion, and acceptability of these components by motor vehicle assemblers. Results from the study show that there is capacity to make more motor vehicle components in Kenya. On the average only 27% of the capacity is utilized. This represents massive under utilization of resources. The under utilization is mainly due to inadequate demand and having many vehicle and component models in Kenya. Economies of scale can be achieved with expansion of output. The study also shows that there exists an opportunity for export promotion. Due to the present export compensation of 20%, four components manufacturing industries have effective rate of export promotion between 14-15%. However there is need to reduce bureaucracy involved in obtaining export compensation and rebates db sales tax. Also shown is the fact that most motor vehicle assemblers in Kenya are reluctant to use the locally-produced components. The majority of assemblers only use locally-manufactured items mainly because the government bans the importation of such components. Lastly the study recommends various options of assisting the auto-ancillary industry.