The automotive industry is stepping up, with two advanced vehicular sales, spares and service centers, worth 120 million Br, being added to its short list of modern facilities.
Marathon Motor Engineering (MME) will inaugurate an 80 million Br six-story center on Nifas Silk districts’ Debre Zeit Road, in the Saris area, on May 21, 2016. MME, Hyundai’s exclusive import and distribution partner in Ethiopia, will also inaugurate a further four-story building in Hawassa, at a cost of 40 million Br, on the same day.
Special features include a showroom at the building’s entrance, servicing rooms, a spare parts warehouse, paint booth, truck and bus maintenance center and workers’ training centers. Both buildings began construction in 2014 and took two years to be completed.
“The two new branches, which boast modern facilities, will help to satisfy our customers,” said Melkamu Assefa, CEO of Marathon. “We provide a buffet of services to the customers; many of which were not previously available in the country.”
The seven-year-old Marathon sold between 600 to 700 cars last year, taking its total sales since establishment to 1.8 billion Br. Its supplier, the South Korean automaker, Hyundai Motor, and its affiliate Kia Motors, which together are the world’s fifth largest automakers by sales, sold over eight million vehicles in 2015.
“We import new vehicles customized to the Ethiopian altitude, with a range of accessories,” Melkamu stated.
Imports into the country have increased dramatically, since the first motorcar was brought in by Bede Bentley for use by Emperor Menilik in 1907. After Orbis, an importer of Mercedes Benz and Renault, set up shop in 1950, numerous others followed – Paul Ries & Sons started importing vehicles in 1960, MOENCO’s establishment came in 1968, AMCE in 1970 and Nyala Motors in 1973. This influx kick-started the automobile industry. The increase in imports has fluctuated, but growth has been consistent decade after decade. In the 20 years leading up to 2003, there was a 900pc increase in the number of imported vehicles.
The automotive industry, as a whole, imported almost five billion Birr’s worth of cars in Marathon’s opening year of 2009. Last year, that figure more than tripled to almost 18 billion Br. This enabled the government to pocket 417 million dollars in taxes in just 12 months.
Currently, there are 166,309 vehicles in Ethiopia, serving as both freight and passenger transport. Road transport is the dominant mode, with a 90pc share, according to Ministry of Transport data.
Interest in assembling vehicles is also increasing; its activity not so much, however. This time last year, a total of 104 companies were licensed for vehicle assembly in the country – the Ethiopian Investment Commission (EIC) had records of 31 foreign vehicle investment projects, with the remainder domestic. Of this huge number, few are operational. By 2013, there were only 11 companies, employing close to 5,200 people.
Government regulations, tax inconsistencies, production output, shortage of road access, and the lack of foreign currency and finance for the purchase of trucks is keeping the development level of the automobile industry low in comparison to other developing countries, according to a 2013 study by the School of Mechanical and Industrial Engineering’s Institute of Technology, in Bahir Dar.
Nevertheless, transport and communications as a whole stood at 36.16 billion Br, contributing 5.2pc to the GDP in 2013/14. This then later declined to 33.2 billion Br, or 4.8pc, the following fiscal year.
In order to tackle the various challenges faced by the industry, official partners of international brands, like Marathon, got together to form an association – the Ethiopian Vehicles, Machinery Importers and Assemblers Trade Sector Association (VMIATSA) – in 2014. The Association comprises Nyala Motors SC, MOENCO SC, Ries Engineering SC, Tanna Engineering PLC, AMCE-IVECO, Paul Ries and Sons (Eth Ltd), Ethio-Nippon Tech Co Ltd, ORBIS T & T Centre SC, Marathon Motor Engineering, National Motors, Equatorial Business Group PLC, Belay-ab Motors PLC, Kaleb Services F.H PLC and BH Trading & Manufacturing Plc.
Of the vehicles that are imported through their official partners, MOENCO takes the lead overall, while AMCE comes in first for the sale of heavy trucks. The import of lighter trucks is dominated by National Motor’s Isuzus and Marathon tops the sales charts for passenger vehicles.
Having said all of that, the Ethiopian market is dominated by used cars.
Marathon offers a two-year warranty to customers, which, according to Melkamu, brings better sales and enhances customer relations. The company also supplies accessories and has recently begun providing roadside assistance. He said that his company is hoping to reveal the evolving brand of Hyundai, with a truck called Mighty, to be launched along with the centers.
According to Melkamu, the long-term plan is not to remain as the sole importer and distributor of Hyundai, but rather to open an assembly factory in the country.
“When we assemble here, we will be more competitive in the local market,” he said.
There are, however, still many teething problems in this sector.
“The lack of foreign currency and shortage of land discourage the opening of car assembly factories,” Getachew Woldeyes, Association Secretary General, told Fortune. “Other than that, the market is feasible, because importers are surviving.”
Melakamu said that Marathon acquired a license, two months ago, to open an assembly factory, at the cost of half a billion Birr.
“What we are waiting for is land,” he explained.
[allafrica.com/]