In Summary
  • Uganda is mainly dominated by cheap second hand automobile imports, especially from Japan.
  • Therefore, with a plant just across the border, Ugandans might have an opportunity to get experiential new VW products from Rwanda.

The challenge of Uganda’s automobile industry might be hard to refine at the moment but that has not stopped it from growing.
New cars are mainly imported from South Africa, which hosts a number of assembling and manufacturing plants such as Mercedes Benz, VW and Toyota, among others.
This perhaps explains the almost unaffordable prices, especially for new cars because of flight costs and risks of transportation.

However, a number of interventions have been initiated by different car manufacturers, which among others seek to bring assembling plants closer to regional groupings such as East Africa.
Recent initiatives have brought large car brands closer to Uganda but with less impact.
Early this week, German carmaker, Volkswagen (VW) announced it had finalised plans to establish an assembly plant in Rwanda.

The plant, according to the VW South Africa chairperson, Thomas Schaefer, will be established in the Kigali Special Economic Zone with an initial investment of $20m.
In the first phase, the plant is projected to build capacity that will enable it to assemble 5,000 cars annually.

The plant will assemble VW product portfolio raging from hatchback Polo, Passat, Sedan and possibly Teramont, the larger sports utility van.
According to Schaefer, the plant will have a recruitment capacity of about 1,000 workers and it is expected to start operations in May.

Whereas the plant is the first of its kind in Rwanda, VW already has another plant in Thika, Nairobi, which was launched in 2016 by Kenya president Uhuru Kenyatta.
Kenya also has other plants such as Kenya Vehicle Manufacturers, which assembles Hyundai and Associated Vehicle Assemblers Limited, among others.

Long way coming
Apart from motorcycle assembling plants such as Jincheng International Motors, Uganda is yet to establish a car assembling plant.
However, there are plans to set up one in Kapeeka, Nakaseke District, spearheaded by the Chinese government.
Also in plan is building capacity to grow Kiira Motor Corporation into a fully-fledged motor production line.

Kiira Motor Corporation has been involved in the production of car prototypes that use solar.
In Rwanda, VW plans to first launch an inward marketing strategy through which it will invest about $300m to buy its own cars to establish a private car hire firm – Gett - to provide services just like Uber.
According to Schaefer, VW will initially rollout an integrated car hire service of 150 fleet in 2018 and increase it to 250 by 2019. There are also plans to introduce shuttle service.
Schaefer says the choice of Rwanda was because of strategic interests and a highly conducive business environment.

“Rwanda has political stability, zero tolerance to corruption, growth of 7 per cent, a young and tech savvy population and strong support from the government,” he says.
The project is supported by the Rwanda Development Board that is spearheading the Smart City agenda. According to Clare Akamanzi, the Rwanda Development Board chief executive officer, the investment is an opportunity for Rwanda and the region as a whole to invest in last scale manufacturing.

Private firm
Volkswagen Rwanda will operate under Volkswagen Mobility Solutions Rwanda.
The memorandum of the establishment was signed in 2016 with a view of developing an integrated automotive mobility and thereafter build the production facility based on VW’s ‘Think Blue Cars’.
The Think Blue Car’s concept consist of cars that are easy to maintain and environment-friendly because they combine a merit of low fuel consumption and low gas emission.
At initial phase, it will assemble Volkswagen Passat for sedans, Volkswagen Polo, and Volkswagen Teramont for Sport Utility Vehicle.

Impact to Uganda
The plant will give Ugandans an opportunity to spend less in flight cost given that the nearest VW dealerships are in South Africa.
Uganda is mainly dominated by cheap second hand automobile imports, especially from Japan.
Therefore, with a plant just across the border, Ugandans might have an opportunity to get experiential new VW products from Rwanda.

According to Ivan Erisa Musaala who has a particular liking for Golf, the logic is the cars might come at a relatively low price given that they will be assemble nearer to home.
However, he hopes that Uganda Revenue Authority will not slap huge taxes to make them more expensive than they are.