Rwanda’s local production campaign - Made in Rwanda is set to receive a major boost as Volkswagen launches its much anticipated first ever assembled vehicles in Rwanda’s Special Economic Zone this Wednesday. 

The launch will also include an integrated mobility solution, which is a “retail outlet for VW’s assembled vehicles, assembly facility, a training centre and a full suite of mobility services which will be available via a locally designed app,” Volkswagen says.

The assembled vehicle models to be presented could include the Hatchback Polo, the Passat, and possibly the Terramonta large SUV.

The vehicles are made from imported knocked-down parts, which are sent to the assembly plant and assembled into complete vehicles by both machinery and manual labour.

Employment

This phase alone is expected to employ between 500 and 1000 people, according to Thomas Schafer, the CEO of Volkswagen South Africa.

However, the company is not prioritizing car sales in Rwanda; instead, it wants to focus on community car sharing and hailing service – which will enable Rwandans to hire the vehicles for taxi services via a mobile app.

The community car sharing service will be launched before the end of this with around 150 vehicles, and will be followed by the ride hailing service, also with 150 vehicles.

Experts close to the deal say that the assembled vehicles could cost in the region of Rwf15 million ($17,500) to Rwf20 million ($23,300), making them a tad expensive for an average Rwandan.

However the launch comes at a time when member countries of the Tripartite Free Trade Area are involved in a dispute over motor vehicle levies. 

EAC and the Southern African Customs Union are yet to find a common ground on tariffs for the automobile sector.  EAC is unwilling to open up its market for car imports from the South African bloc, as it is protecting the nascent Kenyan and Rwandan Motor vehicle manufacturing plants.

Scandal

The launch also comes at a time when the Volkswagen Group is facing a global scandal over cheating on diesel emissions, which also led to the arrest of Audi CEO Rupert Stadler.

The German carmaker was hit with a fine worth $4.3bn by US regulators because of this scandal – the largest fine faced by a carmaker - and its supervisory board is expected to meet on Wednesday to approve the settlement.

Volkswagen boasts that the cars to be assembled in Rwanda are in line with modern technology and are far friendlier to the environment than older models with high emission levels.

A successfully running car assembly plant is likely to market Rwanda as a growing investment hub, offering arguably the safest business environment in the region, as well as generous incentives.

Main incentives, for example, include a preferential corporate income tax rate of fifteen percent for established assembly plants of any kind in Rwanda, according to the 2015 Investment Code.

Also, international companies which relocate their headquarters or regional offices to Rwanda are exempted from corporate income tax.

The biggest incentive is reserved for those who invest an initial amount of $50 million and above in any sector. Such an investor is entitled to a corporate income tax holiday of seven years.

Volkswagen signed an agreement with French company CFAO, and with Volkswagen Kenya to run its retail and production operation in Rwanda.

Fact Box

Launched in 2017, the Made in Rwanda campaign aims at increasing economic competitiveness by enhancing Rwanda’s domestic market through value chain development.

The Made in Rwanda Policy is aligned with Rwanda’s aspiration to become upper middle income country by 2035 and higher income by 2050 and recognized its contribution to meeting these targets will ensure Rwanda moves into the lower middle-income category by 2020 given its potential to contribute both to Rwanda’s economic growth in general and the trade balance in particular, as well as to productive employment.