Foton Bets Further On EAC Truck Demand
Chinese commercial vehicle (CV) manufacturer Foton is looking to increase its production presence in the East Africa region with plans to build a plant in Uganda. As the company already has an assembly facility in Kenya, the news is supportive of BMI 's view that the CV segment in East Africa will outperform the passenger segment . This is mostly due to the growth of heavy industries, which generates truck demand, and also because of affordability issues in the new car market.
The Chinese firm is awaiting approval from the Ugandan government for the plant, which would turn out 100 vehicles a day. The company is looking to produce trucks and minibuses, in response to the country's growing demand for CVs, which Vice Mayor of Beijing, Gou Zhongwne, says is a result of the country's economic growth. Indeed, BMI 's Africa team expects further growth in 2013 on the back of improved performances by the services, construction and manufacturing sectors. We believe it is the latter two which is driving CV demand.
In 2013, we forecast growth of 9.4% in the number of newly registered commercial vehicles, compared with just 3.3% for the passenger car market. Moreover, we believe average annual CV growth of 10.7% is achievable during our forecast period to 2017, supported by our positive economic outlook. Over the longer term, we believe that growth will continue to accelerate, as investment into the oil and gas sector continues to pour in, and crude exports start to have an impact, beginning in 2016 or 2017, when we are projecting real GDP expansion to surpass 8.0%.
|Heavy Industries Drive Growth|
|Uganda New Commercial Vehicle Registrations (CBUs) And Real GDP Growth (% chg y-o-y)|