Uganda: Is Car Manufacturing Really a Good Investment for Uganda or Are We Deluding Ourselves?

Uganda has tried to venture into the manufacturing of motor vehicles. This effort was herald by the innovations by the Makerere University students who produced an EV vehicle they named Kiira EV. Subsequently, they went to produce the Kayoola bus.

Reeling with this excitement of local innovation, government committed funds to establish a motor vehicle factory in Nakasongola and at Mutai in Jinja. The private sector not to be left out, an ambitious businessman from Kisoro also got into the fray. Under his flagship of Metu industries based in Namanve, he is also gearing up to start producing buses.

Since government’s financial investment in both the NEC’s Nakasongola and the Kiira Motors project in Jinja has been in phases or piecemeal, it is not yet readily ascertained how much in total government has injected in these two undertakings. It was reported that Metu Bus Industries also sought to get government funding and protection.

What is not yet known is how long the country has to wait to see the locally produced buses and vehicles in the motor show rooms and plying our roads.

What is known however is that our neighbours such as Kenya, Tanzania and Rwanda after having assessed and found out such government undertakings to manufacture locally vehicles would not only be a long shot but also not competitive, they decided to resort to courting the renown foreign motor vehicle manufactures to set assembling shops in their respective countries. We now know that, the Swedish truck manufacturers, Scania have set up an assembling plant in Tanzania. Volkswagen, have set up an assembling plant in Rwanda where they are currently producing various models of VW.

There are many heads up advantages when you team up with an already global market player in producing locally a particular vehicle model. First, you as a country don’t have to carry all the financial burden of construction, equipping and operating the plant. Secondly, with such a partnership, there is immediate technological and human knowledge transfer to the country. Thirdly and probably one of the critical aspect of vehicle manufacture is that your product automatically gets to fit in the global supply chain which enable whatever you produce locally to avoid the direct and normally very fierce market competition with the already established brands.

It just now needs to be seen how our Kayoola Bus will compete with the Scania and Isuzu buses produced in Tanzania and Kenya respectively.

Yes, it is possible that government can decree that all purchases of buses for use in the country must be from Kayoola in order to give the local buses manufacturers protection, however it is to be seen as for long that policy can be economically sustainable in such a liberal economic environment that we have.

The economists do know of the power of the long established economic phenomena of comparative or competitive advantage in being fundamental in guiding a successful and sustainable business decision.

May be, this would bring us to asses what actually our country’s competitive advantage is in this undertaking of producing vehicles locally here. In doing this assessment we need to also consider other production sectors that we as a country do engage in.

Here, agriculture must be closely considered side by side with the vehicle manufacturing with a view of ascertaining whether if we had injected all that amount of money that we have put in the vehicle manufacturing endeavours instead in drastically improving our agricultural production.

Would similar investment yield in terms of improving on extension services, provision of better quality planting materials, provision of irrigation, provision of tractors to the medium land holders? How much would it improve on post harvest handling in terms of storage and processing, provision of updated market information and provision of small scale cottage processing equipment for value addition? Wouldn’t all these change make us more competitive in agricultural production in the region than in manufacturing vehicles?

The cardinal theory in economic development is that no country can produce all that it requires, so and that is why there continues to be flourish trade between and among nations. This inter trade enables countries to sell to others what they produce competitively and buy what from others what they can’t produce competitively. That has been the norm and trend of things. There is absolutely no point or economic benefit for anyone to venture into producing what won’t probably be competitive and thus won’t return you expected returns. Days of going into production of articles or commodities for just glory are long gone.