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Why govt should offer more support to Kiira Motors

The Kiira EV vehicle

The Kiira EV vehicle

As the country’s vehicles production flagship, Kiira Motors, continues to champion mission cars made in Uganda, public interest has increased with many commentators coming on board.

It is a mixed bag with some commentaries lacking facts while others are coached in political rhetoric to advance selfish interests geared at sabotaging a government program of strategic economic importance.

However, available data shows that all the top economies of the world have budding automotive industries. From America’s automobile heartbeat in Michigan (General Motors), China’s Shanghai General Motors, Malaysia’s Proton, Japan’s Toyota, South Korea’s Hyundai to South Africa’s Honda, the automotive sector has played a leading role in the development of these countries’ respective economies.

It is not a surprise, therefore, that for all the world biggest economies in 2019 to 2020, which include the USA, China, Japan Germany, United Kingdom, India, France and South Africa, have invested heavily and continue to support their automotive industries. Governments in other relatively small economies like Vietnam, Ethiopia, Nigeria, Morocco, Algeria and Turkey are funding their car producers.

In Asia, governments of major vehicle production countries such as China, South Korea, Malaysia and Japan have played a virtual role to ensure that their automotive industries do not only grow and survive the global economic turbulences but that such industries are at the center of growth for these now dubbed economic tigers.

In these countries, several policy interventions have been engineered from provision of affordable financing to infrastructure development, provision of investment incentives, encouragement on innovation at all levels of higher learning and industry development to local content development programs.

When the global economy is mired in an economic slowdown with global vehicle production dropping more than 10 million units in 2009 from a record high of over 72 million units built in 2007, governments put in place radical economic stimulus packages that boosted their failing automotive industries. Again, these were government-led interventions to support and prevent their automotive industries, which are the engines of their respective economies from collapsing.

It was not long before the positive impact of such initiatives was seen. A clear example is that of China, following the stimulus package from the Chinese government, China’s auto industry registered a rapid growth in 2009 and 2010.

In 2009, China produced more than 13.6 million vehicles, overtaking USA to become the world’s largest vehicle producer. In 2010, the growth momentum continued, bringing China’s vehicle production to nearly 18.3 million units, almost doubling its 2008 production.

The Chinese government had opened up its auto market to international companies but only with the understanding that its domestic manufacturers would not be able to compete with the more sophisticated and experienced foreign rivals. Foreign automakers were allowed to enter the Chinese market only through joint ventures with local partners, oftentimes state-owned companies (SOEs) just like Kiira Motors, each with no more than 50 per cent controlled by a major foreign nameplate automotive manufacturer.

Some of these joint ventures have seen VW joining forces with Shanghai Automotive Industry Corporation (SAIC) and First Automotive Works Corporation (FAW). SAIC is also a joint venture partner of GM, while FAW is also a partner of Toyota. Honda and PSA Peugeot Citroen have both formed partnerships with Dongfeng Motor Corporation.

It is the same story with Malaysia, which used a state-led auto development approach by building national champions (read Kiira Motors) before eventually commercializing and privatizing.

All this shows that the automotive industry, which is going to be a major force for economic emancipation in the East Africa region and on the African continent will require infant industry state funding and policy interventions for sustainability and ultimately competitiveness.

And for the record, Uganda government’s funding of Kiira Motors has not come out of the blue. Due diligence has been made over the years and a blueprint prepared and presented making the case that investing in the automotive sector is a viable venture of national strategic nature.

The Uganda government should not be cowed by the naysayers who are quick to praise our neighbours for carrying out similar investments while criticizing anything that is Ugandan.

msserwanga@gmail.com

The writer is a media and communications consultant /trainer and advocate of the High Court of Uganda.

© 2016 Observer Media Ltd