Ethiopia on Thursday moved closer to its goal of becoming an auto manufacturing hub when South Korea’s Kia Motors signed a deal with a local company to start assembling cars there.
The move will enable Kia to establish a foothold in East Africa, and South Korea’s second-largest automobile manufacturer (Hyundai is No. 1) is considering starting operations elsewhere in Africa. Kia’s only plant on the continent is based in Nigeria, Voice of America reported.
Both Hyundai and its affiliate, Kia, have faced stiff competition in recent years, according to a BBC report. U.S. and Japanese rivals have been regaining lost ground in the U.S., while demand in emerging markets and the world’s No. 1 car market – China – have cooled.
“It is important to penetrate the African market,” said Soon Nam Lee, president of Kia’s Middle East and Africa headquarters, in a Reuters report. “We are also looking at the prospects of opening similar plants in Algeria and other countries.”
The Ethiopian government wants to turn the auto industry into one of the biggest on the continent by offering incentives such as tax breaks and cheap labor, according to Voice of America.
“The aim is to become a leading manufacturing hub in Africa,” said State Minister for Industry Tadesse Haile in a Reuters interview. “We want to become the top producer of cars on the continent in 15 or 20 years.”
Ethiopia produces about 8,000 commercial and other vehicles a year for the local market, including about 2,000 cars but they could make more if they could get more foreign exchange to import more kits, Reuters reported.
Assemblers in Ethiopia put together Chinese brands Geely, FAW, BYD and Lifan.
Kia and local Ethiopian firm Belayab Motors PLC plan to produce the first assembled vehicle in January 2017 at plant in the town of Adama, about 50 miles south of the capital Addis Ababa.
The plant is being expanded with a $6.83 million investment from Belayab.
“We plan to produce 3,000 vehicles of three models every year,”said Fikadu Girma, Belayab’s general manager. If extra shifts are added, production could increase to 9,000 vehicles.
The Rio Sportage sports utility vehicle and Rio subcompact model are among the models that will be assembled at the plant, Belayab said.
SUV sales soared in the U.S. in the first six months of 2016 as a growing number of American motorists returned to driving larger vehicles in line with lower gasoline prices, Korea Times reported.
Kia’s Sportage sales jumped 76.3 percent to 42,229 in the first half of the year.
The 323,000-square-foot (30,000-square-meter) assembly plant in Ethiopia will have the capacity to assemble 12 cars a day in a single shift and 240 cars per month, 2Merkato reported. The Kia deal will create 100 additional jobs.
For now, Ethiopia has to compete with South Africa, which makes 600,000-plus fully manufactured vehicles per year, and Morocco, which makes 200,000. Egypt, Kenya and Sudan also assemble vehicles, according to an AFKInsider report.
Kia Motors Corp. is building a community run auto mechanic training center in Ethiopia due to be completed in 2017, EconomicTimes reported. The centers will enable trainee mechanics to work towards national qualifications.
