Kenya to expand local e-bus assembly

From the newsletter

Sumitomo Corporation, a leading Japanese conglomerate, and their Indian partner, JBM Group, recently announced plans to establish a local assembly plant for “completely knocked-down” (CKD) e-buses. The venture will compete with local champions BasiGo and Roam, who already assemble e-buses in Kenya.

• BasiGo has partnered with Kenya Vehicle Manufacturers (KVM), an established OEM, to locally assemble e-buses. 

• The use of e-buses for public transportation has proven successful, with BasiGo selling over 30 e-buses in Kenya and receiving reservations for over 500 more from bus operators.

More details

• The demand for buses, minibuses, and coaches in Kenya has been increasing, with annual registrations growing from 3,271 in 2019 to 4,701 in 2023. But electric buses account for a very small portion of this, with just about 30 e-buses sold since 2020. Kenya has been at the forefront of championing the adoption of EVs, especially in the public transport sector, and even its Bus Rapid Transit (BRT) project plans to introduce e-buses. The president himself committed to waiving tax and import duty for the first 100,000 electric vehicles, including buses.

• The entry plan of Sumitomo and JBM Group into the Kenyan market is a promising development. These companies possess a huge capital base and could readily establish a local e-bus assembly plant. While it remains unclear whether they intend to build their own facility or collaborate with existing vehicle assemblers like Isuzu East Africa, KVM, and Associated Vehicle Manufacturers. It will be much easier to partner with local assemblers as they currently operate below their full capacity, presenting an opportunity for repurposing existing infrastructure for e-bus assembly.

• BasiGo, a current player in Kenya's e-bus market, offers two models with battery ranges of 250km and 300km, respectively. While this generally satisfies the average daily distance covered by most operators (200 km), the 250 km range can be limiting.  Though BasiGo promises to launch a bigger bus with over a 400km range, there is a need for a higher range, and maybe this is one point Sumitomo and JBM should strongly consider.

• One of the main challenges facing e-bus adoption is the high upfront cost. At over $200,000, they are roughly three times more expensive than fuel-powered buses.  Financing solutions are needed to make them more affordable. BasiGo currently offers a leasing model where operators make a down payment and then pay a fixed rate per kilometre driven. Sumitomo and JBM could leverage their financial resources to provide similar financing options or explore other innovative solutions to address the cost barrier.

• Local e-bus manufacturing is not only happening in Kenya. Uganda's state-backed Kiira Motors is locally assembling its e-buses, and Egypt has revived its El Nasr plant to start manufacturing electric buses. But the market still relies mainly on imports from imports. Even countries with well-established OEMs like South Africa are still relying on Chinese imports.

Our take

• Local assembly of EVs in Africa has not yet taken off. Buses, in particular, seem to lag behind electric motorcycles and cars. But interestingly, a majority of Africans rely on public transport, mainly buses and minibuses, to commute. This presents a big opportunity for any e-bus assembling company looking to enter the African market. Additionally, the existence of trade agreements like the African Continental Free Trade Area (AfCFTA), which enables free cross-border trade, can be explored to facilitate market expansion.

• Kenyan-based vehicle manufacturers currently operate below capacity and should seize the opportunity to partner with Sumitomo and JBM Group. By doing so, they can convert their unutilised capacity for e-bus assembly. The financial strength of these two companies is an added advantage that can be utilised to provide financing solutions to bus operators.