Earlier today, I got involved in a brief argument as to whether Kiira Motors manufactured or assembled the new Kayoola Diesel bus that they recently unveiled. My simple opinion was that unless the company actually manufactured some of the parts from raw materials, what they did couldn’t count for manufacturing in the true sense of the word. Of course, there are circumstances where referring to assembly as manufacturing makes sense. But if you’re dissecting the “made in Uganda” claim, I think a bit more specificity as to what actually took place in the factory is required. Unfortunately, the discussion didn’t last long which was rather frustrating to me but something I’m now used to: whenever I want to have an in-depth discussion about the things that interest me greatly – like the auto-industry – it is practically impossible to find like-minded and willing souls to thrash the topic out with.
Be that as it may, the tweets made me reflect on my skepticism about the Kiira Motors venture. Close friends know that I’ve been a skeptic since day one of the project many years ago even though I’ve rarely voiced my reasons for this (beyond the odd pointed question or remark on Twitter whenever I see some absurd claim from the company or its supporters). I’ve explained my thinking to some of them but I guess this as good a time as any to jot down a summary of my thinking.
Even without delving deep, there’s a lot to question about Kiira Motors. For example, at the time of publishing this, there’s no sign of the new Kayoola Diesel bus on the “Vehicles” section of the website. The only mention of it is a couple of links in the “In The News” section. Neither is there anything about it on their Medium hosted blog which appears to have last been updated in 2018. Then there’s the haphazard product development that doesn’t seem to be backed by any serious master plan. One day, it’s a pure electric compact sedan. The next day, a hybrid midsize sedan. Then a hybrid bus. Then a pure electric bus. And now a diesel bus! Any person who tracks the car industry closely will know the kind of meticulous planning and R&D that goes into product development. KMC’s approach to it is just not it.
Then there are the dubious claims such as the one about a bus being entirely solar powered. When I politely pointed out that there was currently no solar panel compact enough to fit on a typical bus roof that could provide enough juice to keep the bus moving for more than a few minutes, some people threw barbs my way. But I was merely stating a fact – science doesn’t really care much about blind patriotism which is what was driving some of those barbs.
But the truth is, all these are simple enough to fix – relatively speaking. It is possible to do a much better job with media/PR and product launches with minimal effort. It is also possible to assemble a team that can do a believable roadmap and product development short/mid/long term plan. None of those issues are part of the 2 major problems I see with the project. Those are – in my opinion – almost intractable and they are (1) underinvestment and (2) lack of a supporting ecosystem.
1. Under Investment: The car industry is notoriously competitive and so players invest vast sums of money just to keep up with the rest of the industry. A few years ago, Ford invested more than $1BN developing a single model (albeit its most important one) – the F150 line of trucks. Most of this cost was attributed to the switch from steel to aluminum for the chassis. Every single automaker spends billions on R&D every year. The smaller makers have alliances with bigger ones to share costs via platform sharing and badge engineering. Many of them are now partially or fully owned by bigger entities. Just yesterday, Jaguar Landrover announced Jaguar would be an electric only brand by 2025 and in order to achieve this, the company would be spending $3.5B per year. It is rather telling that Tesla is the only brand new successful mass market car maker in about a century. Yet it too took 17 years and billions of dollars to turn a couple of profitable quarters and its long term success is not guaranteed at all.
What does all this mean for Kiira Motors? The company was allocated about $40M for use over 4 years (2018 – 2022). Imagine taking a $40M gun to fight against $1B missiles (Toyota’s annual R&D spend is actually $10B). But that isn’t even the full story. Media reports indicated that the company hadn’t received all the funds pledged as per the disbursement plan. Unfortunately, in this sector, underinvestment is probably worse than no investment at all. Most of my skepticism is informed by knowledge of what it takes to develop products in the auto sector and how expensive it is. And yet, ultimately, the market decides the winners so even all that money and effort can go to waste if it doesn’t produce winners. I simply don’t see how $10M per year can do magic here.
2. Lack of an Ecosystem: To appreciate the manufacturing vs assembly arguments, it is worth stepping back and taking a bird’s eye view of what goes into making a motor vehicle. All the components have to be manufactured from scratch by someone. Most manufacturers nowadays outsource the manufacture of many parts to suppliers. But most of them actually design or produce very strict, well defined requirements for their suppliers. This relationship leads to a lot of collaboration which is itself quite a feat to pull off even if that part of the industry doesn’t get talked about a lot. Regardless of actual manufacturer, the process of making these parts requires a lot of domain-specific knowledge. Making modern headlamps requires different knowledge from manufacturing gearboxes. Ditto for making modern suspension parts versus car seats (with all the miniature motors some of them feature for the dizzying array of functiona they offer) or entertainment systems. Many car makers make their own engines or the main parts. Making engine blocks requires different know-how compared to making the ECUs that control most modern engines. Each player in this vast web of manufacturing competencies has vast knowledge of materials, manufacturing processes, supply chain management, talent sourcing etc. A large part of what I’m referring to as the “ecosystem” involves having access to and relationships with these industry players. Now, for most car manufacturing hubs, all these players exist within a short distance of each other (short being relative depending on the nature of transport links available). And so, the question of whether a BMW sedan is made in Germany is rather moot if the engine was manufactured by BMW from raw metal in Germany, body stamped in Germany by BMW, gearbox manufactured by ZF in Germany, tyres made by Continental in Germany and lights and ECU manufactured by Bosch in Germany. In this case, there truly is no question as to where it was made. But it is possible for BMW to assemble cars in the US or China – which they actually do. This makes it rather tricky to answer that question given some of the components may very well be coming from different places within/without the US. But, even for this case, BMW will make use of a well established ecosystem to source components competitively. That ecosystem may be geographically distributed but it is well honed and fit for purpose. The question of local content by value is often a critical factor in establishing what incentives are availed to the maker and so there are very clear definitions and formulas for working that out. (I’ve never seen such a formula for KMC by the way and the “Made in Uganda” evangelists seem oblivious to such technical things)
We don’t have any such ecosystem here or in the region and I firmly believe that such ecosystems cannot be built overnight in a top-down manner. You don’t establish a car manufacturer by decree and then expect all the low-level pieces to fall in place as if by magic. Underfunded magic at that.
But it gets worse. Part of the ecosystem also involves other constantly evolving parts such as human resource (design and engineering talent) and government regulation. Modern cars are highly regulated and so aspects such as design, emissions, safety standards etc are governed by the regulations in place in different markets. For a car industry to grow, the government must be competent enought to put in place regulations comparable to the rest of the world and the means of testing whether vehicles produced under it’s jurisdiction comply with the regulations. So – what safety regulations would KMC be required to comply with? What crash tests will they have to do to demonstrate compliance? What emissions standards are in place for the diesel bus? Obviously, we can’t blame KMC for the lack of these. But how will they become a competitive exporter if their home market has no regulations to talk about? But the ecosystem also has to have local consumers. This is probably the hardest pill to swallow. How many Ugandans or indeed East Africans can afford a brand new car? Of those that can, how many would opt for a KMC product? Maybe that it is why they’ve pivoted to commercial vehicles. But even commercial vehicles are subject to the laws of the market. Even feeder activities that help to build a car culture are lacking. We don’t have a single track for track-based motorsports for instance. Incidentally, a lot of car testing is done on such tracks so you wonder what kind of testing KMC will be doing for its passenger vehicles. Rough road testing isn’t sufficient even though we have enough facilities for that.
Is it possible to build a sustainable motor vehicle industry with limited funds and lack of a supporting ecosystem? I definitely don’t think so. Is there anything else we could be pouring our efforts into that would have greater impact in the same area? I definitely think so. But that’s something for another post.