When Volkswagen announced their entry into the market in January, a common question among Rwandans was the cost of the new cars.
At the plant’s launch on Wednesday, Volkswagen Rwanda had so far produced one VW Polo model, the most affordable of the locally-assembled options.
From an announcement 18 months ago, today #Rwanda joins the automotive industry with 1st car assembled by #Volkswagen & introducing 1st in #Africa #smart mobility solutions @RDBrwanda pic.twitter.com/D7YCXkVkmb
— Emmanuel Hategeka (@ehategeka) June 27, 2018
The vehicle costs $23,881 (Rwf 20.5M) all taxes included.
Volkswagen Passat will retail at $ 37,674 (Rwf 32.3M) while Tiguan which is a sports utility vehicle will be sold at $37,719 (about Rwf32.4M).
Volkswagen Amarok (the pick-up truck) will go for $44,559 (Rwf 38M) while the Teramont will retail for $48,156 (about Rwf 41M).
Explaining their sales projection for 2018, Thomas Schäfer, Chief Executive of Volkswagen Group South Africa told The New Times that they were looking at total sales of about 100 cars of the various models in the course of the year.
He, however, said that production priority is currently on the mobility innovation which is available via an application-based solution dubbed ‘move’.
The mobility solution makes it possible for firms, communities, government ministries, Embassies and parastatals among others to have access to a fleet of Volkswagen vehicles which they can use on demand.
Companies can sign up to the services for their employees to have access to a self-drive vehicle or a chauffeur-driven service.
He said that the cost of the service depends on the specification of the car among other factors. However, on average, clients will pay about Rwf 11,300 per hour for the vehicles.
“A number of embassies have already expressed interest in the service and we are also in discussion with a number of ministries and other organizations,” Schäfer said.
The cost of the locally assembled cars in the country is somewhat high compared to international markets.
For instance, on the company’s global website, a VW Tiguan is priced at $24,595 on the firm’s global website which is about $10,000 less than the pricing in Rwanda. The trend is similar for other VW models.
Schäfer explained that the difference is a result of the cost of logistics.
The importation of the parts to be assembled into the country is quite high and has an unnecessary cost on the car price, he said.
“Among the factors that prohibit growth is the logistics costs. It’s quite costly to bring a container from Mombasa to Kigali,” Schäfer said.
He put the cost of transporting a container from Mombasa to Kigali at around $4,000.
The parts are imported from South Africa, transported by sea to the port of Mombasa and later by road to Kigali.
To have a bigger impact in the local market, he told The New Times that the country also ought to consider reducing the age of imported second-hand cars over time.
“They should consider phasing out second-hand cars slowly. For instance, they could begin by reducing the age of cars allowed into the country say starting at 4 years and further reduction gradually with time,” he said.
The firm is also seeking to enter into financing agreement with local banks and other financial institutions to allow Rwandans to buy the vehicles on credit.
This would increase their penetration as few Rwandans can afford to pay for the cars off their savings.
“We are discussing with a number of local financial partners as we speak, it’s not finalized yet but we are looking to close an agreement soon,” he said.
Statistics from the Rwanda Revenue Authority as of 2017 indicated that between 7,000 and 9,000 cars are imported annually.