NAIROBI/KIGALI -- Volkswagen will start producing cars in Kenya and Rwanda, deepening its local manufacturing operations in Africa where it expects vehicle sales to grow by 40 percent within the next five years.
"Volkswagen wants to strengthen its presence in emerging markets. That is why Africa ranks high on our agenda," said Volkswagen brand chief Herbert Diess.
VW plans to start making the Polo Vivo in Thika, Kenya, re-opening a car assembly plant in the country after a four-decade hiatus.
VW assembled cars in Kenya in the 1960s and 1970s and will now join a number of rivals which already have local assembly operations, including Isuzu, Toyota , Nissan and Mitsubishi.
Kenya's car market is currently dominated by low-priced second-hand imports from countries such as Japan. It mostly assembles trucks, pick-ups and buses from kits supplied by foreign manufacturers.
The VW assembly plant will begin with the Vivo model and expand to a range of vehicles, with the first car expected to be produced before the end of the year, officials said.
Volkswagen plans to start a ride-hailing service in Rwanda in a sign of how the carmaker is developing pay-per-use transportation models in new markets where rival Uber has not yet gained traction.
Rwanda is seen as a good market because competition is less intense. Uber operates in several African countries, including Kenya where it launched in early 2015 and now faces local rivalry.
Volkswagen expanded into ride-hailing in May, when it invested $300 million in Gett, a firm which seeks to outmaneuver Uber by refusing to apply "surge" pricing at peak traffic times.
The automaker also said it would look at using electric versions of the VW Golf in the Rwandan mobility services business.
VW also said it had agreed to set up a vehicle production facility in Rwanda. It did not elaborate on the targeted production volumes or mention which models would be built locally.
"There will be an investigation phase which will go on from January until April and May until we have the final business model together and if all looks good we will move ahead and we will see the first cars being assembled by the end of year," VW's South Africa CEO Thomas Schaefer said in a news conference in Kigali on Wednesday.
Volkswagen has been producing cars in Africa since 1951, when it started making the VW Beetle in South Africa.
VW said last month it will produce the VW Golf as well as several models from Seat, Skoda in Algeria, starting next year.