Automotive Industry Analysis of Uganda, 2016

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 Aftermarket in the Automotive Industry

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,

www.automotiveindustryuganda.blogspot.com

www.ugandamotors.blogspot.com

Nalubega Complex, Bombo road

                                                      Tel: 0704 762575 / 0753 632211