Global automakers are establishing assembly plants in Kenya as they seek to increase sales in East Africa, sub-Saharan Africa’s fastest-growing region, with projected 2017 gross domestic product (GDP) growth of 5.4%, according to the World Bank.

East Africa’s expected 2017 GDP growth is much higher than the average 1.5% growth forecast for sub-Saharan Africa

The automakers that have set up shop in Kenya – East Africa’s biggest economy – have been attracted by the incentives that the country’s government has introduced, including the abolition of excise tax on locally assembled vehicles and a 25% import duty waiver on completely knocked down parts, giving the assemblers a price advantage over imported fully built vehicles.

In a development that will put an additional damper on vehicle imports, governments across the East African Community (EAC) intend to lower the age limit of imported used cars to five years by 2021. Kenya and Tanzania currently enforce eight-year and ten-year age limits respectively, while Rwanda and Burundi have no limits.

According to Kenya Motor Association data, the country imports 70 000 used cars each year, most of them from Japan.

The impact of local vehicle assembly is already being felt in Kenya, with the number of new vehicles rolling off local assembly lines increasing from 9 514 in 2014 to 10 181 in 2015.

Most of the global automakers that have established assembly plants in Kenya are not newcomers to the country – they are returning, having exited in the 1970s and 80s, when the Kenyan economy was on its knees, following the collapse of the original EAC trading bloc.

Swedish truck and construction equipment maker Volvo Group is the latest multinational to venture into Kenya. It plans to build a $25-million assembly plant in the coastal city of Mombasa. By assembling in Kenya, Volvo seeks to boost its market share in Kenya, Uganda and Tanzania from about 2% currently to at least 18%.

“We believe strongly in the growth of this region – Kenya and the neighbouring countries – and . . . we think now is [the best] time to invest in this country,” says Volvo Trucks president Claes Nilsson.

In Africa, Volvo has assembly operations in South Africa and Morocco. Its entry into Kenya came only two months after Italian giant Iveco announced it was setting up a $24-million assembly plant, also in Mombasa, in partnership with Global Motors Centre.

Other multinationals that have established assembly operations in Kenya include Germany’s Volkswagen, which set up a plant to produce the Polo Vivo model, Japanese giant Toyota and France’s Peugeot.

General Motors East Africa, which was recently acquired by Isuzu, remains the leading assembler in Kenya, building 6 000 units a year.