Automotive Industry Analysis of Uganda, 2016
Introduction
Automotive
Industry development Alliance (AIDA) is a Ugandan alliance of automotive
industry stakeholders, automotive associations, automotive aftermarket,
automotive parts dealers, accessories, service, tool, equipment, automobile
suppliers, materials and supplies. AIDA was formed in 2009 for the
consolidation of automotive parts dealers, automotive accessories, automobile
suppliers, and automotive service industry players. AIDA strives to network
with various automotive industry players, companies, car manufacturers and agents,
government, local government, authorities, tertiary and education institutions,
associations, national and international organizations, to provide a forum of
sharing ideas, discuss issues and devise solutions to the automotive industry.
It is established to help integrate, network and develop the Ugandan Automotive
Industry to standard levels through addressing issues and challenges facing the
sector. AIDA is among the founding organizations of the African Automotive
Industry Alliance (AAIA).
Uganda’s automotive industry includes the importation, supply
and assembly of (light vehicles, light weight trucks, buses, motorcycles and
heavy trucks) and supply of parts used in the OEM Markets and replacement
markets, aftermarket. Uganda currently
has a fleet of around 800,000 – 1,000,000 of vehicles; about 99 % of those
units are supplied by imports dominated by used vehicles and used spare parts.
The percentage of imported used vehicles and parts is slowly decreasing. Like
in any other country, various kinds of vehicles both private and commercial
play a significant role in economy development. Besides, allowing people to
travel at anytime and at their own pace, they help in carrying the raw
materials from its sources up to the delivery of the finished goods at the port
for export, or at the doorsteps of the ultimate consumers. In the urban and
rural areas the labor force including the managerial work force use them to go
and come back from the working place. Apart from the private utility, there are
uses of various types of vehicles for other purposes including agricultural
purposes. Baring some local production of insignificant quantities of
indigenous parts and components, all vehicles and parts are imported into Uganda
in either in CKD (Completely knocked down components) or SKD (Semi knocked down
components) or in finished conditions. Interestingly, a ratio can be drawn
between the total value of import of vehicles in the country and that of import
of parts and components.
A.
Objectives of the Survey
The main objective of the survey was
to provide comprehensive information on the market for selected products in Uganda,
with a view of assisting Uganda’s automotive industry to become an important organized
industry.
The
demand surveys will, in particular, aim at:
• Describing the characteristics and
structure of the market, including details concerning individual importer
end-users;
•
Assessing the
potential for increasing demand and / or changing to new sources of supply;
•
Identifying
impediments affecting imports of parts and components;
• Determining areas wherein specific
measures are required, with reference to customs procedures, payment
arrangements, licensing and other rules and regulations.
In addition to describing market
characteristics for the benefit of potential suppliers in Uganda, the survey
also aims at analyzing the existing constraints in the import sector concerned
and at formulating recommendations for action by governments and others
relevant authorities.
The study comprised of surveys, desk
research, field studies, interview and discussions with the knowledgeable
people. Relevant papers, reports, government gazette notifications, newspapers
reporting were reviewed in the desk research phase. Interviews and discussions
were held with the assemblers/ entrepreneurs, importers, concerned officials of
the government agencies, trade associations, bankers, automotive workshop
owners, computerized servicing centers, local agent of branded automotive
companies, automotive technicians and experts, etc. for objective analysis of
the sector. Data has been collected from both primary and secondary sources for
necessary analysis.
B.
Summary of findings, conclusions and recommendations
While concluding the report on the demand and supply
analysis of the automotive parts and components sector in Uganda, the following
issues and findings have come out having importance:
• There is a steady growth in the use
of various types of vehicles in Uganda. Reasons are increased economic
activities, high degree of mobility of people for different purposes, improved
bridge and culverts, roads and highways, etc. Increased trade, commerce and
export have also created additional demand for various types of automobiles.
Demand of construction vehicles and auto equipment used in construction works
also increased to a great extent due to the increased number of on-going
construction works both in private and public sector. On the top of that, the
life style of Ugandan people particularly the growing middle class in the urban
areas have been changing very fast and improving, which has resulted in greater
movements and greater use of vehicles in the country.
• Uganda does not have any vehicles
industry except a few private sector automotive assembling companies especially
motorcycles and three-wheelers who have entered into a collaborative
arrangement with Asian companies. All these local private assembling plants are
established in collaboration with the foreign companies.
• The local assemblers are using mostly
the imported parts and components except a very few local components like body,
battery, plastic and rubber components, etc.
• Only the battery for various types of
vehicles and brake padsare being produced in Uganda and it is also being
exported to other countries.
• Locally produced parts and components
are sometimes not durable and they lack quality standard, and are not
well-designed compared to the imported brands available in the market.
• Most of the vehicles are being
imported from countries like Japan, India, China, South Korea, Malaysia,
Indonesia, Italy, UK, Germany, France, USA, etc. through their local agents in Uganda.
• Domestic parts and components
industries are not developed at all due to lack of adequate attention from the
government, skilled manpower, absence of large amount of capital investment
required, technology up-gradation, absence of suitable foreign collaborators
and traditional small market size in the country, etc.
• Importers are facing problems while
importing various types of parts for lack of transport security, unexpected and
“whimsical” interference of customs department, etc.
• Parts and components are mainly being
imported by road from Japan, China, India, Taiwan, Other Asian countries and
Europe through Kenya. Limited quantities are also imported by air on emergency
basis.
• The use of various types of motor
parts is being influenced by several groups of people involved in this sector
and they are technicians in the workshop, retailers promoting their imported spares,
automotive engineers/managers of large private and government corporate houses.
• The government under its development
program is encouraging use of motor vehicles and buses in the major cities by
imposing restrictions in the use of motorcycles which are considered cumbersome
to city road users and hazardous to environmental pollution. The city local
government has extended support to float commercial vehicle i.e. buses in the
capital city (Pioneer Buses).
I. Main Report on Demand and Supply
Survey of Vehicles
A.
Automotive Industry Sector in Uganda
While assessing the demand and supply
of auto parts and components in Uganda, it is essential to analyze the users,
their usage habits and requirements and other related aspects of auto parts and
components. The automotive sector that uses various parts and components in Uganda
comprises of both imported and locally assembled vehicles. In estimating the
overall demand and supply of auto parts and components, it is important to
critically look into the existing scenario of the automotive industry in Uganda
since these two things are inter-related and positively correlated.
1.
Situational
Analysis of Automotive Industry in Uganda
Uganda does not have automotive industry worth the
name. Over the last three decades, the use of various types of vehicles has
shown a definite increased trend. Reasons are many, namely, increased income of
particular segment of people, availability of financial support, improved roads
and high ways, increased level of economic activities, steady economic growth,
increased mobility of people from one place to another in search of jobs,
increased volume of trade, commerce and export, etc.
It may be mentioned here that only the agricultural
sector required a large number of various types of vehicles stating from heavy
duty carrier, pickup van, truck, etc. to motor cars. This single largest sector
needs various types of vehicles for various purposes and account for about 60%
of the country’s commercial transport requirements. Increase in the mobility of
individual people has also resulted in a tremendous increase in the use of
various light motor vehicles.
Most typical character of Ugandan automotive sector is
that there is a wide variety of brands and the countries of origin mainly
include countries like Japan, India, South Korea, China, Germany, France,
Malaysia, UK and USA. Following brands of vehicles are now available in the
local market that require different types of parts and components on regular
basis:
Table
1: Different Brands of Vehicles in Uganda
|
Products
category
|
Brand
names
|
|
Heavy Bus
|
Isuzu, Mitsubishi, Volvo, Tata, Ashok
Leyland, etc.
|
|
Mini bus
|
Isuzu, Mitsubishi, Toyota, Tata,
Benz, etc.
|
|
Microbus
|
Nissan, Mitsubishi, Toyota, etc.
|
|
Heavy truck
|
Sino Truck, Tata, Bed Ford, Isuzu,
Ashok Leyland, Benz
|
|
Mini
Truck
|
Isuzu,
Tata, Mitsubishi, Toyota, Ford, Eicher, etc.
|
|
Motor Car
|
Toyota, Mercedes Benz, Nissan,
Mitsubishi, Ford, Suzuki,
|
|
|
Dewoo,
Kia, Hyundai, BMW, Subaru, etc.
|
|
Motor-cycle
|
Honda, Bajaj, Jialing, Quinqui,
Yamaha, Suzuki, Hero,
|
|
Light & heavy commercial vehicles
|
Nissan, Daewoo, Huyandi, Volvo, Ashok
Leyland, Tata,
|
|
|
Hino,
Mitsubishi, Isuzu, etc.
|
|
Farm and agricultural vehicles
|
Ferguson, Daewoo, Dongfang, Kubota,
etc.
|
|
|
|
Basically, parts and
components are required for the above types of vehicles from countries of
origin or from other reliable sources. Use of parts and components has a positive
co-relation with number of vehicles in use in the country. During the last five
years, the following vehicles were imported in Uganda:
Table 2: Various Types of
Vehicles in Uganda during 2010-2015 (Million)
 |
|
|
|
Vehicle/Year
|
2010-11
|
|
2011-12
|
|
2012-13
|
|
2013-14
|
2014-15
|
|
|
|
Two & Three Wheelers
|
|
|
|
|
|
|
|
|
|
|
|
Taxi
|
Not
Available
|
|
Not Available
|
|
Not Available
|
|
Not Available
|
Not Available
|
|
|
|
Three wheeler
|
Not
Available
|
|
Not Available
|
|
Not Available
|
|
Not Available
|
Not Available
|
|
|
|
Motor-cycle
|
Not Available
|
|
Not Available
|
|
Not Available
|
|
Not Available
|
Not Available
|
|
|
|
Light & Heavy Commercial Vehicles
|
|
|
|
|
|
|
|||
|
|
Bus/ Minibus
|
Not Available
|
|
Not Available
|
|
Not Available
|
|
Not Available
|
Not Available
|
|
|
|
Micro-bus
|
Not Available
|
|
Not Available
|
|
Not Available
|
|
Not Available
|
Not Available
|
|
|
|
Trucks
|
Not Available
|
|
Not Available
|
|
Not Available
|
|
Not Available
|
Not Available
|
|
|
|
Jeep
|
Not Available
|
|
Not Available
|
|
Not Available
|
|
Not Available
|
Not Available
|
|
|
|
Car
|
Not Available
|
|
Not Available
|
|
Not Available
|
|
Not Available
|
Not Available
|
|
|
|
Farm & Agricultural Vehicles
|
|
|
|
|
|
|
|
|
|
|
|
Tractor
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
|
|||
|
|
Trailers
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
|
|||
|
|
Others
|
Not Available
|
|
Not Available
|
|
Not Available
|
|
Not Available
|
Not Available
|
|
|
|
Total
|
Not Available
|
|
Not Available
|
|
Not Available
|
|
Not Available
|
Not Available
|
|
The table above shows different
categories of vehicles that include two and three wheelers, motor cars, light
and heavy commercial vehicles and farm and agricultural vehicles that are
already in use. Generally, the demand of vehicles has been increasing and as
such, the requirement of parts and components is also increasing in the same
proportion.
2.
Factors
influencing increase in demand of automotive
Factors
influencing increase in demand of vehicles are as below:
• Government annual development plan
has given priority on transport and communication development;
•
Government has introduced
effective transport policy in its five-year plan;
• Availability of financial support
from formal and informal sources. Formal sources are banks, leasing companies,
purchases companies, microfinance companies etc;
•
Encouragement of
the private sector to make investments in automotive industry;
• Promulgation of laws to make the
importation of vehicles at cheaper price (duty and taxes reducedto import
new vehicles);
•
Improved roads
and highways and increased number of bridge and culverts;
•
Improved life
style in the urban areas and growing middle income class;
•
Alternative and
cheaper means of fuel, like natural gas;
•
Adaptation of
improved technology in agricultural activities/cultivation activities.
There has been an increasing trend in
the use of all sorts of automobiles/vehicles in Uganda. However, the increased
demand of individual types of automotive varies from case to case. For example,
the use of motor cars for personnel and official movement has increased at a
higher rate than other types of vehicle. Also, the use of urban commercial
vehicles has also increased at a higher rate to meet increased requirements.
These trends are expected to continue in future.
3.
Comparative
scenario of different types of automobiles in Uganda
A
comparative scenario of different vehicles and their usage trend may be
explained as below:
(a)
Motorcycle
There is an increasing trend in the
use of motorcycle in Uganda by a new group of users. Traditionally, students,
individual businessmen, officials of marketing companies and pharmaceutical
industries use motorcycles. Over the last one and a half decades, the field
level officials of different non- government organizations have been using a
large number of motorcycles. Also, there are some occasional uses of motorcycle
like election campaign and other national and social program. In Uganda, both
locally assembled motorcycle and imported motorcycle are available for
intending users as detailed below:
(i)
Locally assembled
motorcycle: Mainly, there are about 2 locally assembled brands. For example, Bajaj
and TVS Victor.
(ii)
Imported
motorcycle: There are at least 7-8 different regular brands of motorcycle and
these are: Honda, Yamaha, Suzuki from
Japan, Jailing, Hero, Suzuki, Vespa,Pasola etc.
Motorcycle is extensively used in Uganda
in both rural and urban areas. The use of motorcycle has gradually increased in
Uganda due to several reasons as mentioned below:
•
Easy to drive;
• Easy access to remote location;
• Cheapest transport;
•
Longevity of the
vehicle;
• Easy to handle and park at any place.
While assessing the future demand of
motorcycle, we observe that there is an increase in the use of motorcycle
facilitated by the present trend of economy and the changed behavior of the
target users. Key factors influencing the market demand of motorcycles are:
• Increased Traffic Jam in major cities
creating more demand for motorcycle by certain segment of people;
•
Improved roads
and high ways;
• Availability of leasing finance
facilities by almost all leasing companies, banks and financial institutions.
At present, there are a limited
number of producers of spare parts of motorcycle in Uganda. Therefore, the
major spare and parts are imported from different countries like Japan, China,
India, Pakistan, Italy, England, America, Germany, etc. However, the motorcycle
users have a great challenge of sometimes brutal theft of their machines which
most times involve loss of lives.
(b)
Three wheelers
There is a slow growth in the number
of three wheelers in Uganda which are mostly used for commercial loads than for
passenger services.
(c)
Motorcars
Increased demand, economic
development and changed life style have resulted in a great increase in the
number of motor cars and the demand for motor cars is still increasing day by
day. Both brand new and reconditioned cars are imported into the country.
Statistics show that majority of the people usually prefer reconditioned
motorcars more than brand new cars due to lower price.
In Uganda, more than 80% of
the total motorcars are coming from Japan. Ugandans workingand trading in Japan
involve themselves in reconditioned car business. The government is planning to
put an age restriction on the import of reconditioned motor cars.
The government would reduce duties and
taxes on the import of new cars to discourage reconditioned car import. Impact
is that people will be able to buy new cars at a reasonable price having longer
durability. On the other hand, motorcars show the highest growth as may be seen
above. This will lead to an increase in the use of motor parts and components
as well.
(d)
Light & Heavy Commercial Vehicles (Bus, Minibus, Truck, Pick-up,
etc)
Like the motorcar, there has been an
increasing trend in the number of light and heavy commercial vehicles that
include mini bus, bus, human howlers, passenger carriers, trucks, pick-ups,
covered vans, large covered vans, etc. Over the last one decade, the use of
these types of vehicles has increased at a high rate. This is due to increased
demand for these types of vehicles effectively backed by institutional
financial support to procure them. This growth rate will continue to increase
in the near future. There are different brands of new and reconditioned light
and heavy commercial vehicles available in Uganda.
(e)
Farm and Agricultural Equipment/Vehicles
Also, there is an increasing trend in
the number of farm and agricultural equipment/vehicles due to increased
application of modern tools and techniques in farming and agricultural
production. Now-a-day, agricultural vehicles like power tiller, tractor and
trailers are being used in the rural areas more frequently than the past.
During the last one decade, various agricultural development projects funded by
the different donor agencies have been implemented in the rural areas and under
those programs, the farmers were given financial facilities through NGOs and
banks to procure modern agricultural equipment including farm vehicles.
Traditional cow based cultivation method is giving away to mechanized farming
in the rural areas. One of the key elements that made this possible is the
availability of lease financing facilities in the country and the large amount
of agricultural credit funds. It has been observed that there is a reasonable
growth in the number of agricultural equipment every year. This growth rate
will continue to increase in the near future provided there is no drastic
change in the government policy relating to agricultural sector like reduction
in the subsidy and assistance and low cost fund for the farmers.
4.
Estimated Demand
of Vehicles in Uganda
Taking into consideration
the future prospects and also keeping the recent growth pace influenced by
various elements discussed earlier, it is expected that there would an
additional increase in the use of vehicles. In view of the possible new avenues
and prospects and looking into the weighted average growth rate, the table
below shows a projected demand for the next five years.
Table
3: Projected demand of Vehicles in Uganda
|
Vehicle/Year
|
|
2016-17
|
2017-18
|
2018-19
|
2019-20
|
2020-21
|
|
Two & Three Wheelers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three wheeler
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
|
|
Motor-cycle
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
|
|
Light & Heavy Commercial
Vehicles
|
|
|
|
|
|
|
|
Bus/ Minibus
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
|
|
Micro-bus
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
|
|
Trucks
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
|
|
Jeep
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
|
|
Car
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
|
|
Farm & Agricultural Vehicles
|
|
|
|
|
|
|
|
Tractor
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
|
|
Trailers
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
|
|
Others
|
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
|
Total
|
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
5.
Regulatory
Environment and the Role of the Government
After independence in 1962, the
country had to follow the rules and regulations of the then British government.
Even soon after 1962, the same rules and regulations were followed with slight
modification. Before 1986, the government did not effectively control the
sector to the extent now it is. However, the regulatory environment needs
reforms and restructuring to bring efficiency and dynamism in day-to-day work.
Effective program to modernize and expand the regulatory environment has become
indispensable to handle the expanded activities in the total transport sector.
They are mainly concerned with the environmental impact, registrations of
vehicles, road and route permits; licensing of vehicles; road safety; quality
and dependable spare parts; and vehicle fitness for plying on roads, DMC, etc.
B.
Auto parts and components industry in Uganda
1.
Auto Parts
and Components Industry in Uganda
As Uganda has no automotive industry,
the sector is totally dependent on import, except a few automotive-assembling
units. Every year number of automotive is increasing due to increased
requirement, demand as well as increased population. The sector has growth
potentials.
Consumption of auto parts depends on
several factors. There are numerous types of auto parts being used by different
types of automotive. Some parts have very short usage time and some have longer
usage time. In Uganda, since there is no automotive manufacturing plant, there are
not enough producers of auto parts. However, there is an area in southern part
of Kampala City where there are few indigenous auto parts manufacturing units.
These parts are required for the exterior purpose but not for the important and
critical interior purpose. These are limited to brake pads, batteries, vehicle
body parts, etc.
Total demand for parts and components
will increase in future because of increased use of vehicles on roads, which
has to be met by imports and import only. The projected demand of auto parts of
various types of vehicles are estimated below:
Table 4: Projected Demand of Auto
Parts Import in Uganda
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parts/Year
|
2016-17
|
2017-18
|
2018-19
|
2019-20
|
2021-22
|
|
|
|
Chassis with engine for tractor
etc
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
|
|
|
Body for tractor, passenger car, etc.
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
|
|
|
Parts and accessories of tractor,
goods
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
|
|
|
vehicles
etc.
|
|
|
|
|
|
|
|
|
Motorcycle/auxiliary motor fit
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
|
|
|
Invalid carriage, mechanical
propel
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
|
|
|
Part/and accessory of motorcycle etc.
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
|
|
|
Total
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
Not Available
|
|
|
|
|
|
|
|
|
|
|
|
2.
Structure of
the Auto Parts Market
The parts and components
market in Uganda is almost 100% import based. There is no quality local
manufacturer of parts and components. So, several groups of importers of parts
and components are there that include commercial importers, automotive
assembling houses, public sector institutions and diplomatic importers. In Uganda,
parts and components are mainly imported from countries like Japan, UK, Taiwan,
China, Korea, Malaysia, USA, India, Indonesia, Pakistan, etc.
The market of parts and
components is very small but expanding rapidly. Commercial importers facilitate
bulk quantity import of parts that are distributed through wholesalers and
retailers. End users get the parts from the retailers and the retailers buy
parts from the importers. However, there are also importers who have their own
retail outlets. An assembler may also be an importer who requires a large
quantity of parts and components for its assembling unit. A limited number of
commercial importers import parts and components from different sources as mentioned
above.
In most cases, the assembler imports
parts and components from the country where the brand is originated. Some
assemblers even purchase parts and components directly from the big importers.
There is another group within the distribution channel of parts and components
i.e. auto servicing centers like garage, mechanical workshop, body building
units, etc. The servicing centers purchase parts from the whole seller as well
as from the retailer. End users get parts and components from retailers dealing
in different types and brands of automobiles. Although no local manufacturer of
quality parts does exist, but active negotiations are going on to set up joint
venture parts and component manufacturing units with China, Korea and Taiwan.
Present structure of parts and components market is graphically shown below:
Assemblers Importers
Servicing
Center
Retailer
|
Wholesaler
|
Retailer
|
Wholesaler
|
|
|
|
|
|
|
|
|
|
|
Servicing
Center
End
Users
In Uganda, neither we have an automobile
industry nor a quality auto parts industry. So, the people of Uganda have no
clear idea about the automobile industry or auto parts and components and their
usage. The market of auto parts and components is influenced by couple of
elements. People while purchase auto parts and components, they are influenced
by several factors and these auto servicing centers, workshop and garage, motor
pool managers, Institutional Importers (i.e. embassy), retailers, agents of
branded automotive, etc.
3.
Foreign Exporters
of Automotive Components
The automotive market in Uganda has
been dominated by the multinationals from Japan, Korea, China, India, and
Europe since independence. Still the multinationals play significant role to
meet the demand and supply and occupy a large market share in comparison to
their number. Over the last couple of years, some automobile importers like Afro
Motors, Simba Motors, Kampala Motors, Nis Uganda, Akamba Motors, etc. have
entered the local market. But, as our local automotive market is70% dominated
by Japan, we continue to import a large share from Japan. There is large market
for the exporters of automotive parts and components of the participating
countries as the local industry is based on the imported components.
4.
Role of
the International Trade Organizations
International
Trade Organizations and
diplomatic missions can extend support by providing collective information on
the traders, exporters, and importers of automotive parts and components by
development of a website on automotive in Africa through the African Automotive
Industry Alliance (AAIA). Individual country wide database will be very
effective for both importers and exporters to locate their business
counterparts in different countries. Support and assistance may also be
provided by international organizations through advocacy on necessary policy
changes and adopting new policy in the automotive components sectors. Different
policy support on bilateral trade and commerce in the automotive sector should also
continue.
C.
Domestic Parts and Components Industry
1.
Domestic
Parts and Components Industry
Presently, there is no well-organized
and quality manufacturer of parts and components in Uganda. Some low quality
indigenous manufacturing of parts and components are there but they are carried
out against specific order to meet emergency requirement. There is no mass
production to meet the requirements. Given below are some of the products of
what the local manufacturers try to produce:
•
Filters,
radiators, radiator hoses, air filter housing;
•
Brake pads, brake
drum, brake disc;
• Electrical parts such as battery, wiring
and other lights;
• Trim and upholstery such as carpet,
floor mat, rear parcel shelf, seat assembly, safety belt and melt damping
sheet;
•
General parts
such as paint and thinner, under sea.
2.
Production
for the last five years
There is no automotive manufacturing
plant in Uganda. Only few companies are involved in the automotive support
industry.
3.
Product Specifications,
Quality and Prices
There is no standard product
specification in Uganda. But, the assembler, who is involved in the assembling
the brand product, ensure specification of the Brand Company. Average quality
of the product is not compatible to the imported product.
II.
Import of Auto Parts and Components
A.
Factors affecting imports
Sometimes import is affected by
factors that include political unrest, sudden fall in overall demand of automotive,
foreign exchange, change of government policy, delay in shipment, custom
clearance, etc.
B.
Projection of Imports of next Five Years
Considering the past trend and the
possibility of further development in roads and high ways of Uganda, it is
expected that the requirement for import of automobiles will increase in
future. Also, there is a propensity of further improvement in the domestic
economy that enhances per capita income of households, which has positive
correlation with individual’s expenditure on transport. Moreover, the following
factors may be considered for the increased automotive business in Uganda in
future:
•
Possible Reduction
of tax on the new brand motor vehicles;
•
Government
initiative to float urban commercial vehicles;
•
Improved roads
and highways;
•
Increased
economic activities;
•
Expanded and
increased volume of export and shipment of exportable;
• Growing Middle Income
Class;
• High degree of mobility of human beings
.
C.
Sources of Imports
The
important source of imports is shown in the following table:
|
Source
|
Items
|
Value in Millions
|
|
|
|
2014-2015
|
|
Japan
|
Heavy
truck, bus, mini
truck, mini bus,
commercial
|
Not Available
|
|
|
vehicles, farm
and agricultural vehicles,
motorcars,
|
|
|
|
motorcycles,
etc. and other motor parts and components,
|
|
|
|
tyre,
battery, etc.
|
|
|
India
|
Truck, bus, mini truck, minibus,
commercial vehicles,
|
Not Available
|
|
|
motorcars,
motorcycles, scooter, Three Wheelers, etc. and other
|
|
|
|
motor
parts and components, tyre, battery, etc.
|
|
|
Singapore
|
Motor parts and components, tyre,
etc.
|
Not Available
|
|
South Africa
|
Motorcars, tyre, etc.
|
Not Available
|
|
Indonesia
|
Tyre, battery, etc.
|
Not Available
|
|
Italy
|
Auto tempo, parts and components
|
Not Available
|
|
South Korea
|
Motorcars, heavy truck, bus, coster,
light commercial
|
Not Available
|
|
|
vehicles,
motorcycles, parts and components
|
|
|
China
|
Motorcycles, parts and components
|
Not Available
|
|
USA
|
Farm and agricultural vehicles, motor
parts and
|
Not Available
|
|
|
components,
etc.
|
|
|
UK
|
Motorcars, Tyre, battery, motorcars,
farm and agricultural vehicles,
|
Not Available
|
|
|
motor
parts and components, etc.
|
|
|
Hong Kong
|
Motorcycles, parts and components
|
Not Available
|
|
|
|
|
D.
Import Policy and Procedures
Government is committed to
foster a gradual development of free market economy in the light of
international agreements and treaties. In the interest of export promotion and
investment in the country, Uganda has a long term, stable, facilitative and
liberal Import Policy. Efforts have been made to make the Import Policy easier
and more liberal. Provisions have already been made to allow import of capital
machinery and industrial raw materials on consignment basis. In the present
Import Policy Order second hand / reconditioned machinery are importable subject
to fulfillment of certain
E.
Rules and Regulations on Imports
(a) Import of any goods or machinery in
Uganda will be done according to certain rules and regulations. Parts,
accessories or component, import of which is otherwise banned or restricted,
shall however, be importable along with machinery item is permissible for
import.
(b) Manufacturing age of the used
reconditioned vehicles must not be more than certain years at the time
of
shipment. In case of determining the date/age of the concerned vehicles, the
age of the vehicles shall start counting from the first day of the next year of
manufacturing. In case of vehicle made in Japan, the date of manufacturing
shall be determined from the chassis book, published by the Japan Automotive
Association. In case of import of vehicles made in other countries where
chassis book is not published, importer shall submit a certificate regarding
the date of manufacture of vehicle from an internationally reputed surveyor
firm.
(c) Commercial import of second hands/reconditioned
engines and gearboxes of bus, truck, mini – bus and macro bus are permissible.
But such engine and gearboxes shall not be permissible for import if they are
more than certain years old. In this case a certificate regarding age-limit,
either from exporting country’s recognized Chamber of Commerce & Industry
or from an internationally reputed surveyors shall be submitted to the customs
Authority at the time of release of the goods. Following documents along with
the LCA must be submitted to the nominated banks by the importers:
•
L/C application
form duly signed by the importer;
• indents for goods issued by indent or
a pro forma invoice obtained from the foreign supplier;
•
insurance cover
note.
1.
Government
Regulations on Imports
(a)
Pre-shipment Inspection
Unless otherwise specified,
pre-shipment inspection of imported goods shall not be obligatory in case of
import by the private sector importers.
(b)
Import Procedures
(i)
Import License
not required: No import License are necessary for import of any item;
(c)
Import of Parts, Accessories and Components
Parts, accessories or components,
import of which is otherwise banned or restricted, shall however, be importable
along with machinery only as its integral and indispensable part provided the
said machinery item is permissible for import.
F.
Import impediments, malpractice and suggested remedies
The automotive sector of Uganda is
heavily depended on imported parts and components, as mentioned in the earlier
sections. Since the volume of consumption has been increasing during the last
one-decade, the importers frequently procure the fast moving items to meet the
market demand.
1.
Import
impediments
Importers of auto parts and
components face various problems as explained by different importers. Main
problems and obstacles that the local importers have been facing are lying with
the port and revenue authority and the operating procedures and practices. To
assess taxes there is a provision for Clean Report finding based on Pre-shipment
Inspection (PSI) but the custom
officials do not accept pre-shipment inspection certificate while assessing the
CIF value, as attended by the individual importers. Also they mentioned that
the custom officials lack adequate information and knowledge about various
parts and components. After the customs and clearing issue, the next impediment
is being faced by the importer is lack of integrity honesty within the business
environment.
Another problem that hinders smooth
import of parts and components is the higher amount of L/C margin required by
the bank sometimes. Due to higher margin the importer may suffer financial
loses.
Lastly, the importers do not have
access to important data and information on automotive import and consumption.
There is a severe shortage in organized data on use, consumption, production
and import of auto parts, due to which the demand and supply sometimes do not
match which result in price distortion in the local market. However, an
individual importer or an overseas supplier of parts and components should undertake
a detailed study and analyze the market before setting a business target.
2.
Malpractice,
Unfair Means, etc. in Import
Almost majority of importers surveyed
informed that there has been a significant volume of parts and components
available in the local market coming through smuggling and illegal ways.
Importers under invoice the value of goods and sometimes country of origin of
goods is not accurate.
The government custom authority fails
to prevent illegal entry of smuggled items of parts and components. Entry of
huge quantity of smuggled items somehow escapes duty and taxes that result in
price distortion for the honest importers.
3.
Suggested
Remedies
A number of suggestions, advice,
appeal and recommendations have been made by the individual importers which
they were contacted. Overall remedies suggested can be discussed under
different point of views according to their importance:
§
Reduction of
import duty and taxes;
§
Immediate
measures to stop entry of smuggled and illegal parts and components;
§
Up gradation and
smoothening the custom procedures;
§
Reduction of L/C
margin of the banks and financial institutions;
§ Unified duty and tax structure for all parts and
components;
§
Custom officials
should accept pre-shipment inspection certificate while assessing duty and
taxes;
§
Clean Report
Finding should be basis for the pre-shipment inspection certificate;
§ No duty and taxes should be imposed
on any import of parts and components from the AU Countries;
§ The government should bring changes
in its import and other local policy relating to the automotive and auto parts
industry.
G.
Import and Distribution Channels
Spares and components are imported by
sea, by roads (from India only) and also emergency imports by air. By far the
sea port is the most popular entry point for the imports. Importers maintain
bulk inventory of imported parts and components and the retailers go to them to
obtain their requirements. End users obtain their requirements from the
retailers.
H. Power to the Government
to Control Road Transport
The
government, having regard to –
the advantages offered to the public,
trade and industry by the development of motor transports, and the desirability
of co-ordinations road and rail transport, and the desirability of preventing
uneconomic competition among motor vehicles, and after having heard the
representatives of the interests affected and having consulted the Authority,
may by notification in the official gazette, -
i)
Prohibit
or restrict throughout Uganda or in any area or on any route within Uganda,
subject to such conditions as it may think desirable the conveying of long
distance goods traffic generally, or of prescribed class of goods by private of
public carriers;
ii)
Fix
maximum or minimum fares or freights for stage carriages, contract carriages
and public carriers to be applicable throughout Uganda or within any area or on
any route within Uganda;
iii)
Disallow
the use as transport vehicle, any vehicles or class of vehicle manufactured
prior to a particular year.
The government shall permit at such
intervals of time as it may fix, the interests affected by any notification
issued under sub-section (1) to make representations urging the cancellation or
variation of the notification on the following grounds namely:
• That the railways are not giving
reasonable facilities or are taking unfair advantage of the action of the
government under this section;
•
That condition
have changed since the publication of the notification;
•
That the special
needs of a particular industry or locality require to be considered afresh.
If the government, after considering
any representation made to it under sub-section (2) and having heard the
representatives of the interests affected and the Authority is satisfied that
any notification issued under sub-section (1) ought to be cancelled or varied,
it may cancel the notification or vary it in such manner as it thinks fit.
III. Market
Scenario of Major and Fast Moving Parts and Components
Since there is no local
industry in Uganda producing quality, durable and well designed auto parts and
components, whatever competition takes place that is within the imported parts.
Below is an analysis of major fast moving parts and components that will give
an indication about the individual market share and structure, etc.
Automotive Repair &
Maintenance Services
Repair and maintenance
service revenue for vehicles is projected to increase. The industry’s current
moderate revenue growth results from improvements in vehicle quality,
reliability and durability. However, opportunities to provide service are
expected to arise as more vehicles reach prime aftermarket service age.
Quick lubes, Tyre Stores,
Repair Chains
General repair garages and
service stations are expected to experience growth where an increasing number of
these providers install convenience stores in the place of service bays.
Most Independent garages
are hampered by the inability to access OEM diagnostic and service data at
cost-effective rates, and often have difficulty attracting and retaining
skilled technicians.
Quick lubes will continue
to experience strong growth as they expand beyond oil changes and increasingly
offer services that are possible while the vehicle is in position for an oil
change. These can include radiator flush and refill, transmission oil and
filter change, diagnostic
system scans, cabin air
filter changes, tire rotation and vehicle inspections.
Body shops will continue to
perform the majority of vehicle body repair work, although dealers are
attempting to capture more of this business. Specialists will experience
moderate growth as
a group, caused by the
improved quality of stainless steel exhaust systems and extended OEM powertrain
warranties.
Tire stores and repair
chains will experience strong growth as they expand into more service
categories, and to an extent replace general repair garages as local service
providers.
IV.
Market Prospects and Market Entry Strategy
1.
Macroeconomic
Environment
The local automotive industries are
heavily depended on import. Both the vehicles and parts and components are
being imported from outside except 2-3 parts and components like battery,
plastic parts, etc. which are being produced and supplied by a few local
companies. The local automotive assembling houses assemble vehicles using
mostly the imported parts and components and the parts are being imported from
countries like China, India, Japan, Germany, Taiwan, South Korea, Malaysia,
Italy, UK, etc. Almost 95% of the parts and components used by the local
vehicles are imported and the rest 5% are locally produced.
Due to increased economic activities,
high degree of mobility of human being and goods, improved roads and highways,
increasing purchasing power, tendency to improve life style of people day by
day, and finally, existence of favorable government policy indicate a positive
growth in the use of vehicles that in turn indicates an increased demand for
parts and components in the local market. Also, availability of lease finance
facility, provision of hire purchase, credit line of the different donor
agencies, etc. create accelerated demand for vehicles and its parts and
components. Since the local automotive and parts industry is not developed,
there is an ample scope for market development and penetration by a new
entrant.
Although 3-4 local assembling units
have been quite regular in their production activities with sound financial
condition but the parts and components manufacturing companies are not so
regular except one or two. However, recent growth in the assembling of light vehicles
for commercial use has been very impressive, and it attracted most of the local
manufacturers of parts to expand their production and product lines as well.
Again, the percentage of using locally produced components is very low,
compared to the imported. Therefore, the aggregate demand for parts and
components, no matter what is the source, will increase in the coming years,
wherein the existing government policy will contribute positively.
2.
Availability
of Marketing Services
The country has already experienced
presence of a good number of local marketing organizations. Over the years
these entities built up solid clientele among the local business communities to
facilitate marketing of products. To promote auto parts and components of any
type in the local market, importers and assembling houses are now taking
advantages of various marketing support services that includes local marketing
Agency ship, Distributorship, Indenting, Stockiest, etc. Apart from these, for
the purpose of direct marketing, hiring adequate number of qualified marketing
professionals is not a problem now–a-day. Also, a large number of local
advertising firms/agents have been assisting the companies in promoting their
products. Training on marketing, sales and distribution are being offered and
imparted by various training institutes. There are local trade journals on auto
parts specifically covering the automotive sector. Also, for promotion of local
market, trade fair, exhibitions and other events take place at certain
intervals. Marketing services can be explored and developed. Advertisement
agencies are also well developed in Uganda.
3.
Recommended
Strategy for New Entrants
The present market of automotive/spares
and components is dominated by a few companies having major share of the entire
market. For any new entrant, it will be desirable if he has sound technical
know how, precise plan with adequate financial and other resources. Success
will largely depend on several factors that are not mutually exclusive, rather
a combination of elements, which are explained below:
• Sound technology and technical know how;
• Innovative and sustainable products;
• Adequate quality control, research and development
facilities and ISO certification;
• Concrete and precise financial planning and available
financial resources;
• Proper marketing plan with adequate sales and
marketing force.
Key Stakeholders
As with any other sector industry,
responsibilities are allocated among many organs. The following bodies and are
specified in the automotive industry plans:
Main Responsibilities of
Implementing Organizations
|
Organization
|
Responsibility
|
|
Ministry of Trade and
Industry
|
To promulgate standards of assembling and manufacturing enterprise ,
call for FDI projects and “to help”
current firms follow investment licenses
|
|
Ministry of Education,
Science and Technology
|
To calculate method
of localization standards for vehicles, technology transferring
|
|
Ministry of Finance and
Planning
|
To solve tariff issues
and promulgate financial support policies
|
|
Ministry of Works and
Transport
|
To promulgate new
regulations on safety
|
|
Uganda Police Traffic
Dept
|
To limit the number of
registered vehicles
|
|
Association of Mechanical
Enterprises, Uganda Motor Industry Association, Automotive Industry
Development Alliance, Uganda Society of Automotive Engineers etc.
|
To strengthen cooperation
and linkage within industry; To propose supporting policies to develop the
industry in accordance with approved strategy and Sector plan
|
|
Enterprises authorized to
manufacture specialized components
|
To meet the requirements
stipulated in the Industry plan
|
Programs to Support
Core Strategies
|
Strategy
|
|
Supporting
Projects
|
|
|
|
1.
|
Industry situation
analysis project
|
|
|
|
2.
|
Automotive
information center
|
|
|
Creating predictable
|
3.
|
Automotive training
center
|
|
|
4.
|
Automotive engineer
development project
|
|
|
|
environment for
|
|
||
|
5.
|
Competency
certification system development
|
|
|
|
business operation
|
|
||
|
|
project
|
|
|
|
|
|
|
|
|
|
6.
|
Market
responsiveness project
|
|
|
|
7.
|
Automotive tax
structure research project
|
|
|
|
8.
|
Plan for the
expansion of infrastructure necessary
|
|
|
|
|
for industrial
development
|
|
|
|
1.
|
Cluster-based
development project
|
|
|
Enhancing the
|
2.
|
Automotive standard
project
|
|
|
3.
|
Automotive products
standard testing center
|
|
|
|
competitiveness of
the
|
|
||
|
4.
|
Automotive research
and development center
|
|
|
|
Uganda automotive
|
|
||
|
5.
|
Supplier development
program
|
|
|
|
industry
|
|
||
|
6.
|
Product development
project.
|
|
|
|
|
|
||
|
|
|
|
|
The
automotive information center must build an easily accessible website on the
industry and its success is judged by the number of research reports using the
data provided by this center.
6. Weaknesses /
Challenges
We raise five points below as the weaknesses of
Uganda’s Automotive Industry requiring urgent reconsideration.
(1) Unclear Positioning
of Uganda in the Regional Production Network
It
is appropriate for Uganda to study external trends in order to (i) effectively
position its automotive industry in the regional context; and (ii) design
appropriate supporting policies to achieve the positioning goal. Countries on
the positioning map and value chain analysis should at least include Japan,
India, China, Thailand, Taiwan, Malaysia, South Korea, UK, German, USA, Italy
and France. This analysis is lacking in the current industry information.Uganda’s
geo-strategic location is potential for future automotive production base,
manufacturing, assembly and supplier base in the region. Automotive MNCs should
discover this niche.
(2) Unexplained
assumptions for Demand forecast
Since
the development of the automobile industry critically hinges on market size, it
is important to examine how market demand for 2016 and 2020 are forecasted and
what assumptions were made in this process. Since taxes and tariffs will have a
great impact on the growth of the domestic automobile market, demand forecast
should be conditional on these policies.
(3) The leading role of
the Automobile Industry
Uganda considers the automobile industry as one of the
important sectors but there are some negative factors that may impede
its success.
(4) Supporting policies
are comprehensive but not concrete
Uganda’s
automotive industry cannot be easily organized since concrete action plans and
programs are not yet identified. Even though supporting policies are mentioned,
the industrial still remains general. As with other Ugandan laws and decisions,
the industry must wait for detailed documents by relevant ministries before it
can be put into practice. The crucial question therefore is: what should be the
contents of the concrete actions and plans to come. There is no dedicated
support R&D in the automotive industry in Uganda.
(5) Poor Coordination
among involved Stakeholders
This
is also the situation with not only the automobile industry but also all other
industries. For an effective implementation of automotive industrial plans and
strategies, three types of cooperation are needed: (i) linkages between local
enterprises and foreigncompanies operating in Uganda with the former supplying
parts and services to the latter, (ii) coordination among ministries and other
official bodies in implementing the automotive plans in a consistent manner,
and (iii) close and regular channels between the business community, trade
associations and policy makers to implement and devise policies in a realistic
way.
Coping with Traffic Problems
Fast
income growth is generating a boom in the automobile and motorbike markets,
causing traffic congestion, accidents and air pollution especially in and
around Kampala. The pace of urban planning, traffic policy renovation and
infrastructure construction does not seem able to keep up with the rapid
increase in traffic volume. The non-observance of traffic rules further
aggravates the situation. Coping with these problems has become a national
priority, and responsible authorities are urged to take effective measures. The
existing automotive subsector associations don’t seem to care and enforce good
traffic practices to their respective members through their self-regulation
frameworks and most don’t have streamlined consumer protection measures in
their plans.
However,
ad hoc and temporary measures are often counter-productive. A proper mix of
short-, medium- and long-term policies are needed to solve these problems. The
government together with stakeholders are required to improve their capacity to
design and implement an integrated policy package. In the short run, strict
enforcement of traffic laws, better traffic-flow management, and mobilization
of traffic police are called for. In the medium run, the provision of more bus
lines, widening of major streets, and improved intersections and ramps are
necessary. In the long run, transportation infrastructure such as bridges,
tunnels, new highways, bypasses and subways must be constructed or expedited. A
good traffic master plan should guide these phased policy actions.
However,
abrupt crisis suppressing measures are often ineffective since popular demand
for cars and motorbikes is very strong and there are a number of ways to
circumvent such measures. They must be replaced by a proper policy mix as
explained above as soon as possible.
At
the same time, the suppliers of automobiles and motorbikes should bear a part
of responsibility to restore traffic order and reduce accidents and air
pollution. They should work actively with Ugandan government and trade
associations to fulfill corporate
social responsibility under clear inclusive guidelines and cooperative
spirit. While this will add to their current cost, the healthy growth of the
automotive sector will greatly improve the business environment and popular
support for these industries in the long run.
The automotive industry is experiencing changes in Uganda with growing
used car sales and the aftermarket. The aftermarket business creates attractive
revenues and margins but used car aftermarket activities are not usually on the
management plans of the major automakers country agents in Uganda. Aftermarket
operations have a very broad scope and contain all activities related to
maintaining a car after its initial sale and until the end of its lifecycle.
The relevant activities are also referred to as aftermarket parts and services.
The aftermarket encompasses all parts and services purchased for light- and heavy-duty
vehicles after the original sale, including replacement parts, accessories,
lubricants, appearance products and service repairs.
Major automakers country agents have to break their traditional course
of action and focus more on developing more comprehensive aftersales services
and make sure they don’t lose focus on their brand consumer’s requirements. One
key element in this can be looking for new collaboration that opens up the
value chain like focusing on developing service innovations and control
counterfeit spare parts through collaboration with local community focused mechanics
and garages.
Automotive Industry Development Alliance (AIDA)
P.O.Box 29324 Kampala, Uganda
Email: aidaug@yahoo.com
, ugandanmotors@gmail.com,
Nalubega
Complex, Bombo road
Tel: 0704
762575 / 0753 632211
