Most global carmakers and automotive supply chains avoid setting up factories or assembly plants in Africa. However, in the mid-2010s, Toyota did something different. It increased production. And not just anywhere—Toyota’s assembly plant in Kenya is now at the heart of its East African strategy.
Why Did Toyota’s Supply Chain Expand Its Local Production in Kenya?
The African automotive supply chain is characterized by high import dependence, limited intra-African trade, and a focus on raw materials rather than processed components. So why did Toyota decide to swim against the tide, and why Kenya? The answer is simple. High import taxes drove up the cost of new cars, making it tough to compete with the flood of used imports.
People wanted Toyota cars, but they couldn’t always afford them. Shipping delays didn’t help, either. And then, there was the competition from rival brands like Isuzu (General Motors East Africa), which had long dominated new vehicle sales through local assembly of buses and trucks.
Toyota knew it had to make a move because the strategy at the time was not sustainable. However, setting up a plant came with a lot of challenges, especially where cost and production were concerned.
Toyota Partnered with Associated Vehicle Assemblers (AVA)
Toyota found a solution to the problem by partnering with AVA, a local company assembling vehicles in Kenya since the 1970s. AVA had the tools, the people, and the experience to get things rolling fast. Instead of building a plant from scratch, Toyota’s supply chain used what was already available.
The strategy allowed the company to ramp up operations by assembling kits for models like the Toyota Hilux pickup and Land Cruiser at AVA (models were locally assembled in Kenya in earlier decades). Later, Toyota introduced its Hino commercial truck and bus brand into Kenya via AVA.
In 2013, Toyota Kenya (with Hino Motors, a Toyota subsidiary) opened a KSh 500 million assembly line in Mombasa for Hino trucks and buses – the first such project by Toyota’s African subsidiary.
Toyota’s assembly plant in Kenya now builds popular models like the Hilux and Hiace vans, making it faster and cheaper than shipping them from overseas. However, the move was never just about building cars. It was about controlling the supply chain, cutting costs, and selling more vehicles in East Africa, including Kenya, Uganda, Rwanda, and beyond.
This wasn’t just smart, though. It was a blueprint. One that is changing how automotive supply chain leaders think about manufacturing in Africa.
But Toyota’s Assembly Plant in Kenya Faced Tough Challenges
Setting up an Assembly plant the way Toyota did made sense on paper. However, even with all the perceived advantages, Toyota still ran into problems when setting up local assembly:
1. Used Cars Flooded the Market
Like many African countries, Kenya’s new vehicle market is constrained by the prevalence of used car imports.
The problem began in the early 2000s when liberalization flooded East Africa with used cars. To give you a picture of how bad it is, in 2014, new vehicle sales grew to 17,000 units, which only accounted for fewer than 1 in 6 of all vehicle registrations, with the rest being mostly used imports.
2. Low Economies of Scale
Auto manufacturing typically requires high volumes to be efficient. However, because of poor demand, assembly plants in Kenya often operate below capacity. Kenya’s three main assemblers (AVA in Mombasa, KVM in Thika, and Isuzu’s Nairobi plant) were operating at only about one-third of their collective capacity as of early 2022.
For Toyota, initial production volumes were relatively small – for instance, the plan was to assemble about 500 units of the Toyota Hiace van per year when that line launched and about 350 units/year for the Fortuner SUV in 2023. Such volumes are tiny by global standards and could lead to higher unit costs. The challenge was to make the business case work with these limited volumes, at least in the ramp-up stage.
3. Supply Chain and Local Content Constraints
Toyota’s automotive supply chain had to contend with the lack of an established local supply base for automotive components in Kenya. Decades of relying on imports meant few parts (like batteries, tires, glass, etc.) were locally accessible. Most assembly at AVA is semi-knockdown (SKD) or complete knockdown (CKD), where most parts are imported, and only the final assembly is done locally.
The problem here was that the manufacturing and supply chain strategy limits how much value addition happens in the country. And any logistical hiccups (port delays, customs clearance issues) could disrupt the production schedule. Moreover, Toyota struggled to meet high local content thresholds without local component manufacturers.
How Toyota’s Supply Chain Solved These Problems
Toyota didn’t try to fix everything at once. Instead, it used a slow, steady approach:
1. Government Partnership and Policy Support
The timing of Toyota’s investment coincided with government initiatives to revive local auto assembly. The company worked closely with the Kenyan government to create a more favorable operating environment. Notably, in 2019, Kenya introduced a National Automotive Policy aimed at doubling local vehicle production by 2025 and curbing used imports.
Policies like this directly benefited Toyota’s Hino trucks and bus production, effectively removing second-hand competition in that segment. Additionally, the government ramped up the buying and leasing of locally-assembled vehicles for public sector use. Like other assemblers, Toyota capitalized on this through government tenders (for example, supplying police and military vehicles assembled in Kenya).
2. Leveraging a Local Partner (AVA) and Existing Infrastructure
To address the cost and complexity challenges, Toyota’s supply chain did not build a greenfield factory but partnered with AVA as its contract assembler. This move saved significant capital and time. AVA’s facility was already equipped for vehicle assembly, and its workforce was experienced, reducing the startup training required.
Toyota sent its engineers and specialists to work alongside AVA’s team to meet Toyota-specific quality standards. The partnership has been a win-win: Toyota gains local assembly capability with minimal investment, and AVA (owned by Kenya’s Simba Corporation) gains business and technology transfer.
AVA’s proven track record gave Toyota confidence in quality control. For instance, AVA had previously assembled Toyota models (Hilux, Land Cruiser, etc.) and had internationally recognized certifications. Kazuhiko Watanabe of Hino noted that Toyota’s engineers were “impressed by the level of expertise of the Kenyan workforce” at AVA, and thus, “AVA was a natural choice” for local production.
3. Gradual Model Expansion and Market-Focused Lineup
Toyota addressed the challenge of low production volume in Kenya by starting with vehicles with steady, predictable demand. It began with commercial trucks and buses under the Hino brand around 2012–2013, focusing on government and business clients who needed reliable, new vehicles.
This early focus gave the assembly plant consistent work and helped establish Toyota’s local manufacturing presence. Once operations were stable, Toyota expanded to the popular Hilux pickup and Land Cruiser 79 series, which NGOs, government agencies, and commercial users across East Africa widely use.
In 2021, Toyota added the Hiace minibus to target Kenya’s large “matatu” (public transport) sector. The move was strategic. Mmatatus are replaced often, and safety is critical, making new, locally assembled Hiace vans attractive. By 2023, Toyota expanded to assemble the Fortuner SUV. The first one was built in East Africa.
This phased rollout—commercial vehicles, then pickups, vans, and finally SUVs allowed Toyota to train staff progressively, maximize its assembly line, and respond to market demand. The strategy helped improve efficiency and showed growing confidence in Kenya’s production capabilities.
What Was The Impact of The Assembly Plant on Toyota’s Supply Chain Operations?
Toyota’s assembly plant in Kenya became more than just a way to make cars. It improved the company’s supply chain across East Africa. Now, Toyota can:
- Reduce costs, thanks to tax breaks and local shipping.
- Deliver vehicles faster, since they’re built closer to the buyer.
- Train and employ hundreds of Kenyan workers, building up local skills.
- Offer vehicles tailored to local markets, like the Hiace for public transport.
- Partner with local suppliers and service companies to support sales and repairs.
Toyota has also started using the plant to explore new opportunities. In 2023, it began assembling the Fortuner SUV and signed a deal with the Kenyan government to expand production. The company is looking to add more local parts to help reduce costs and build Kenya’s auto industry.
Lessons For Supply Chains Operating Across Africa
The experience of Toyota’s assembly plant in Kenya holds valuable lessons for big companies trying to grow in Africa:
1. Pick the Right Base and Think Regionally
Toyota chose Kenya for its strong market, port access, and role in the East African Community (EAC). Supply chains looking to expand to Africa can learn from this by picking countries that offer local demand and easy access to nearby markets, using regional trade agreements to scale beyond one nation.
2. Partner Locally Instead of Building from Scratch
Toyota worked with Kenya’s AVA instead of setting up a new factory. Local partnerships help cut costs, shorten setup time, and use existing skills and facilities.
3. Target Product Niches Where You Can Win
It can be hard to compete against cheaper products. And it’s not just in the automotive sector. Toyota was able to compete against the used car market by assembling vehicles like buses and pickups locally, ensuring that these new models offered more value. Local builders should focus on products with clear advantages over the prevailing products in the market and consider bundling services to boost appeal.
4. Build Local Supplier Networks
In the beginning, most of Toyota’s parts were imported. However, within a short while, the company could source locally for items like bus bodies because it invested in helping local businesses produce these parts. Companies and supply chains can invest in building supplier capacity over time to reduce dependence on imports and grow regional supply links.
Obinabo Tochukwu Tabansi is a supply chain digital writer & ghostwriter helping professionals and business owners across Africa explore various strategies that work and learn from the success and failures of various supply chains across the globe. He also ghostwrites social content for logistics & supply chain businesses
