China's vehicle manufacturer Foton is setting up an assembly plant in Kenya. The assembly plant is expected to churn out 10,000 units of commercial vehicles, including buses per year, making it one of the biggest foreign direct investments by a Chinese company. Foton said it is setting up the plant to avoid paying a 25 per cent import duty.
The assembly plant is expected to be complete by May 2012, creating more than 100 new direct jobs. Foton vehicles were previously shipped into the country fully made but the move to assemble them locally is set to give them a sharp price advantage. Imports of completely knocked down units (CKD) for local assembly are zero-rated as opposed to a 25 per cent import duty on fully made vehicle imports, giving Foton a greater pricing headroom, riding on China's low cost production.
The entry of Foton comes when relations between Nairobi and Beijing are getting cosier, with China increasingly expanding its economic footprint in the country in line with the government's policy to look East for new investments and aid. This has seen Chinese imports more than double in the last five years.