Industry Trend Analysis - Foton's Re-Entry Challenged By Competitive Market - MAR 2018
BMI View : A robust growth outlook for vehicle demand in Kenya will create the growth opportunities required to support Foton ' s re-entry into the domestic market. That said, an increasing ly competitive automotive landscape will pose a challenge to the Chinese automaker's efforts to rebuild its market share in the country.
In January 2018, Chinese automaker Foton Motor announced it would invest KES257.25mn (USD2.5mn) to re-enter Kenya and rebuild its market share in the domestic market and the greater East Africa region. As part of this investment, the automaker has signed an assembly agreement with Mombasa-based Associated Vehicle Assemblers (AVA) to assemble three to four vehicles per day within the first half of 2018. According to Foton's Kenya president, the firm will aim to hit an assembly target of 1,000 units in 2018, with this going up to 8,000 units in five years.
We expect this investment to present an upside risk to our vehicle production outlook for Kenya over the next five years. As a result, we are revising up our vehicle production forecast for Kenya to growth of 18.3% in 2018, up from 15.2% previously. In addition, we now forecast average annual growth of 16.1% in domestic vehicle output between 2018 and 2022, up from 14.3%.
|Foton Investment Adds Upside To Outlook|
|Kenya - Vehicle Production, Units|
|e/f = BMI estimate/forecast. Source: KNBS, BMI|