We welcome road map to the future for the auto industry

The country's car market is currently dominated by low-priced second-hand imports, mainly from Japan and European countries.

According to the Finance Bill of 2017 tabled in National Assembly  recently for approval, the tax cuts are aimed at giving a kick-start to a nascent local automotive industry.

"A corporation with a newly-established plant for assembling motor vehicles, tractors, fishing boats or out-boat engines, and having a performance agreement with the government ... shall be taxed at a reduced corporate tax rate of 10 per cent for five consecutive years from the year of commencement of production," says part of the bill.

The corporate tax rate in Tanzania currently stands at 30 per cent for both resident and non-resident companies. 

The government says it wants brand-new motor vehicles to be produced within the country and sold both locally and across the East African region as a strategy to boost job creation, tax collection and wider economic growth. 

The Finance Bill 2017, also offers tax exemptions for imports of capital goods such as machinery for the manufacture of vegetable oil, textile, pharmaceutical products, hides and skins to attract investments in line with the government's industrialisation drive.

The proposed legislation further stipulates that a newly-listed company on the Dar es Salaam Stock Exchange (DSE), with at least 35 per cent of its stake floated on the local bourse, will be given a reduced corporate tax rate of 25 per cent for three consecutive years from the listing date.

At least one foreign company, Poland-based agricultural machinery manufacturers Ursus SA, is known to be investing in an assembly plant for tractors along with farming machinery in Kibaha District, Coast Region.

But all in all, Tanzania has been lagging behind in attracting car assembly plants despite a rapid economic growth rate and large population of over 50 million people.

In the meantime, neighbouring Kenya is already hosting some of the world's biggest car manufacturers. German automaker Volkswagen (VW) resumed a production line there this year as it looks to sell more vehicles across the East African region.

VW, which assembled cars in Kenya in the 1960s and 1970s, has joined other major brands already being put together in the neighbouring country, including Isuzu, Toyota, Nissan and Mitsubishi. 

France's PSA Group, the maker of Peugeot and Citroen cars, signed a deal with the Kenyan government earlier this year to open a vehicle assembly plant in Kenya, while Volvo Trucks plans to put up an assembly plant in the neighbouring country next year.

Kenya mostly assembles trucks, pick-ups and buses from kits supplied by foreign manufacturers, although data from the Kenya National Bureau of Statistics showed that the number of vehicles assembled between January and April this year was down 31 per cent year-on-year to 2,258 vehicles.

South Africa exported 173,000 vehicles to Europe in 2016, up from 116,000 in the previous year, and the National Association of Automobile Manufacturers of South Africa forecasts that production will rise by 48 per cent to 900,000 units a year by 2020. Morocco has followed a similar pattern to South Africa, offering incentives for foreign companies.