PROJECT PROPOSAL

FOR

CAR ASSEMBLY & PARTS MANUFACTURING PLANT

PROJECT TO BE IMPLEMENTED IN SHAGER GELAN SUB-CITY,

OROMIA REGION STATE

PRMOTER:-MAAS TECHNOLOGY GROUP CENTER PLC

Apprill, 2023

Shager city, ETHIOPIA

TABLE OF CONTENT
TABLE OF CONTENT.....................................................................................................................................1
EXECUTIVE SUMMARY.................................................................................................................................3
1. INTRODUCTION...............................................................................................................................4
1.1. Project Justification...................................................................................................................4
1.2. Objective of the project.............................................................................................................5
1.3. The Economic Significance of the Project.............................................................................5
1.4. Location and Premises Required............................................................................................7
1.5. Location Map of the Area.........................................................................................................9
2. MARKET STUDY AND PLANT CAPACITY................................................................................10
2.1. Market Study............................................................................................................................10
2.1.1. Present Supply and Demand.........................................................................................10
2.1.2. Projected Demand Analysis...........................................................................................11
2.1.3. Marketing Strategy and Promotion...............................................................................12
2.2. Plant Capacity and Production Program..............................................................................13
2.3. Pricing.......................................................................................................................................13
3. PRODUCTION NATURE, INPUTS, PRODUCTION, TECHNOLOGY AND CIVIL WORK...14
3.1. Product Nature and Description............................................................................................14
3.2. Raw materials and Input........................................................................................................14
3.3. Technology..............................................................................................................................14
3.4. Source of Technology.............................................................................................................17
3.5. Machinery and Equipments...................................................................................................17
3.6. Project Design and Engineering............................................................................................18
3.7. Building and Construction Works..........................................................................................18
3.8. Utilities......................................................................................................................................18
4. MANPOWER AND ORANIZATIONAL MANAGEMENT............................................................19
4.1. Manpower................................................................................................................................19
4.2. Organizational Structure and management.........................................................................19
4.3. Training Requirement.............................................................................................................21

1
5. FINANCIAL REQUIRMENT AND ANALYSIS.............................................................................22
5.1. Total Initial Investment Cost..................................................................................................22
5.1.1. Fixed Investment.............................................................................................................23
5.2. Annual Production Cost at Full Capacity.............................................................................26
5.3. Financial Analysis and Statements.......................................................................................30
5.3.1. Underlying Assumption...................................................................................................30
5.3.2. Sources of Fund..............................................................................................................31
5.3.3. Loan repayment Schedule.............................................................................................32
5.3.4. Depreciation Schedule...................................................................................................32
5.3.5. Revenue Projection.........................................................................................................33
5.3.6. Balance Sheet.................................................................................................................33
5.3.7. Income Loss Statement..................................................................................................34
5.3.8. Cash Flow Statement.....................................................................................................35
5.3.9. Profitability........................................................................................................................36
5.3.10. Break-Even Analysis...................................................................................................36
5.3.11. Pay-Back Period..........................................................................................................36
6. FUTURE DEVELOPMENT............................................................................................................36
7. ENVIRONMENTAL IMPACT OF THE PROJECT......................................................................37
7.1. Socio-Economic Environment...............................................................................................37
7.2. Environmental Impact Assessment of the Project..............................................................37

2
EXECUTIVE SUMMARY

1. Project name Car Assembly & Parts Manufacturing Plant

2. Project Owners

3. Nationality Ethiopian

4. Project Shager Gelan sub-cit

Location
5. Project To assembling medium truck (3.5 tons) & parts (body works) for the
Composition
medium truck and Vans.

6. Premises 10,000M2
Required
7. Total Initial Br. 5,000,000of which 30% equivalent to Br. 1,500,000financed by
Investment
the owners equity and the rest 70% equivalent to br. 3,500,000
Capital
financed through bank loan

8. Employment 160 persons

Opportunity
Permanent workers 120
Skilled 20
Unskilled 100
Temporary workers 40
Skilled 20
Unskilled 20

9. Benefits of the Assembled and supply quality cars and body work service, add
factory For The
value to the economy, Source of Revenue, Employment
Region/
Country opportunity, Save Foreign currency, Benefit for the Local
Community, Stimulate the Local Economy and technology transfer

3
1. INTRODUCTION

In dynamic economic environment, like the one currently exist in Ethiopia, the
development of higher industry and supportive manufacturing sector has a great role to
make the overall economic growth to be persistent. In this regard, Car assembly and
parts manufacturing plant has a great to make the economic growth to be persistent.

The government of Ethiopia has a conducive investment polices and guidelines that
promote the private sectors involvement in the economic development through the
various investment and business endeavors.

In this regard, the owner of the envisioned plant planned to invest in Shager Gelan sub-
city, Oromia regional State, and carried out this pre-project study to check the market,
technical and financial feasibility of this project. The result of the study is very sound
and promising for the owner to start the project in this area.

The promoters are very determined to commence the project. Hence, they expect to get
the required support from the regional and local governments to make the project
operational.

1.1. Project Justification

Ethiopia has a great economic potential in Africa. The current double digit and dynamic
economic growth in all sectors supports the idea to become a great nation. As
components of the economy, agricultural and construction sectors are growing in the
fastest rate. Therefore, there is a need for parallel growth in other manufacturing
industries that have a value chain and pair (backward and forward) relationship with
these sectors to make the growth long-lasting.

In this regard, car assembling plant would have two basic advantages for the
development of an economy. First it facilitates transport of people and goods cheaply.
Second, it facilitates the process of industrial development through the creation of
backward linkages for the manufacture of parts and components.

Besides, the establishment of a low cost vehicle assembly plant in Ethiopia increases
the supply of and motorized vehicles for personnel as well as for good transport in the
urban and possibly in the rural areas. Such facilities will not only care the transportation
problem but are also expected to bring about some qualitative change in the lives of the
population at large.

Since Ethiopia is one of the nation with the least number of vehicles per individuals, the
expansion of car assembly and manufacturing factory has a great impact to alleviate
this problem. Therefore, establishment of car assembling plant will have a good market
in the country.

In addition to the above facts, the following points further explain the rationales for
establishment for the envisioned plant by the owners.

 High market demand and few plant in this sector

 High population.
 Favorable and attractive investment incentives packages by the governments
 The government of Ethiopia promising five year growth and transformation
development plan (2010/11-2014/15), the will bring prosperity to its citizens with
collaboration with private sector investment actions through industrialization.
 Availability of skilled labor force at reasonable price

1.2. Objective of the project

The main objective of the plant is to assembling medium truck (3.5 tons) & parts (body
works) at reasonable price and better quality for domestic market.

1.3. The Economic Significance of the Project

The envisaged project deemed to contribute to the economic development of the nation
in general and the region in specific with following ways:

5
 A. Supply of Quality Assembled car and Body work

The project under discussion will provide quality and fair priced assembled car and body
work service for the country market. This will benefits the users to get better product
with better price and durability.

B. Value Add

The establishment of this factory will add a value to the manufacturing sector in specific
and in the economy in general.

C. Source of Revenue

As public policy of any nation, the government collects different forms of taxes from
different business organizations and individuals. Among the different forms of taxes,
business income taxes, VAT and payroll taxes are collected from undertaking business
activities. Therefore, the factory will serve as sources of revenue for both the region and
nation in general.

D. Employment Opportunity

One of the problems that our country faced is unemployment. Therefore, the current
objective of the government is working on tackling the problem of unemployment and
fostering the development process either through creating self employment or
employment in other organization. Hence, this factory will hire around 1,000 persons.

E. Save the Country’s Foreign Exchange

By minimizing the market gab for cars demand and supply, the factory will help to
reduce the nation’s foreign exchange cost to import these materials. This will save the
foreign exchange resource of the nation.

6
 F. Benefit for The Local Community

As a corporate responsibility the company will engage in different development activities

on the surrounding areas (Shager Gelan sub-city). This will better worse the community
and contribute for the development of the region.

G. Stimulate the Local and National Economy

This factory has positive externality in the zone that will encourage the economic
movement of local economy. Hence, there will be economic relationship and
transactions among different actors.

H. Technology Transfer

By assembled cars and body works, the project will train and develops the capacity of
the technical staffs. By doing this, the company will add value in technology transfer for
the nation.

1.4. Location and Premises Required

i. Location

The envisioned project is planned to be located in Shager Gelan sub-city (which is

around 20Kms from the capital), Oromia Regional State. The main justifications behind
the selection of this location are:

 Strategically located to the central and largest market of the nation (Addis Ababa)

 Relatively advanced development in infrastructure (Power, Water, Telephone

internet, road etc.

 All road to the nearest market outlets

 Accessibility of skilled labor force

7
  Near to port of Djibouti and Mojo dry port that will make ease for inputs and
machines

 Conducive investment policy and governance

 Environmentally fit to car assembly business .

ii. Premises Required

The total land holding of the project is 10,000M2, the premises required planned as
follows in table below;

Table Premises Required and Land Use Plan

SN Description Land Requirement(M2)

1 Assembling Hall 1,200.00

2 Parts manufacturing Hall(Body Work ) 3,500.00
3 Inputs store 1,000.00
4 Product shade (Hangar) 2,805.00
5 Office 200.00
6 Cafeteria 115.00
7 Generator house 165.00
8 Guard house 115.00
9 Parking 200.00
10 Internal road 100.00
11 Waste Accumulation area 500.00
12 Green Area and future expansion 500.00
Total 10,000.00

8
1.5. Location Map of the Area

9
2. MARKET STUDY AND PLANT CAPACITY

2.1. Market Study

2.1.1. Present Supply and Demand

The current mode of transport consists of the modern and traditional transport facilities,
i.e., motor vehicles, horses, donkeys etc. Even in the urban centers, horse carts are being
used along used with motor vehicles. As urbanization grows the use of animals in cities
would become difficult due to high cost of looking after the animals. This on the other
hand requires substituting cheaper means of transport that is least cost in terms of
acquisition and operation. Such type of transport is provided by assembling vehicles
which are relatively cheaper to buy and does not require expensive running costs.

Until recently, the demand for vehicles in Ethiopia was met through imports. The import of
vehicles has been so little in the 1990's that it does not indicate the potential demand for
this of transport. The import of vehicles between 2006 and 2010 in provided in the table
below;

Table-Import of Vehicles

Year Quantity (pcs) Growth rate (%)

2006 950 -
2007 685 -28
2008 725 6
2009 1822 151
2010 3925 115
  Average growth 61
Source: External Trade Statistics.

As can be observed from the above table the import of vehicles between 2006 and 2010
had been growing by an average of 61%. Except in 2007 when the volume of import fell by
28% from that of 2006, a substantial increase had been reported between 2008-2010.

Basically the demand for vehicles is a function of population growth and economic growth.
Of the two factors, economic growth is the most important variable influencing the demand
for vehicles.

10
Consequently the rate of economic growth of the country forecasted for the coming 5
years has been taken to determine the rate of growth of demand for vehicles. Also, the
volume of import of 2011 is assumed to be the current effective demand for vehicles.

On the supply side, a domestic car assembly & parts manufacturing plant has become
operational immediately after construction & machinery installation finishes. The
attainable capacity of the new assembly & parts manufacturing plant, located in Oromia
Special Zone in Sebeta is 300 cars & 300 parts per year. Consequently the pent-up
demand comes to 3,925 vehicles.

2.1.2. Projected Demand Analysis

As already indicated the rate of economic growth forecasted for the coming 5 years is
taken to project the demand for car. The economy of the country is anticipated to grow by
6% in real terms for the coming 5 years.

Transport equipments are most essential accessories for any economic sector demand
for these products depend on the following important factors:

 Sizes and growth rate of the Ethiopia population and economy

 Growth and development paces various sectors of national economy
 Trends of industrialization and urbanization, and
 Access of business community to get loan from banks.

The above factors are showing active involvement of private sector in the government’s
development programs in all sectors of the national economy. Growth of agricultural
sector, population growth, construction of industrial estates, residential and
nonresidential housing units are indicative for the magnitude of demand for vehicles in
the country. Besides, the government has allocated substantial budgets for agricultural,
hydroelectric power generation and distribution, construction of health and educational
institutions and offices throughout the country.

11
The main target markets for the planned plants are:

 General Public
 Industry sector
 Business Sector
 Construction sector and
 Individual business men
Accordingly the projected demanded in given in table below;

Table -Demand Projection

Year Projected Domestic Supply Unsatisfied Demand

Demand (pcs) (pcs) (pcs)
2011 3925 0 3925
2012 4161 0 4161
2013 4411 0 4411
2014 4676 0 4676
2015 4957 0 4957
2016 5255 0 5255
2017 5570 0 5570
2018 5904 0 5904
2019 6258 0 6258
2020 6634 0 6634
2021 7032 0 7032

2.1.3. Marketing Strategy and Promotion

The company will follow the following promotional methods:

 Electronic Medias

 Advertising(Media, flayer and news paper)

 Public Relations

 Branding( based on the international partner for the company)

The marketing strategy mainly focus on the satisfying the needs, orders and the
requirement of the customers.

12
 2.2. Plant Capacity and Production Program

Considering the gradual growth of demand and the time required to develop the
required skill the rate of capacity utilization during the first, second and third year of
production will be 50%, 75% and 100% respectively. Full capacity utilization will be
reached during the third year of operation. The plant will operate 290 days per year and
one shift system(8 hours)..

Table Production Programme and plant capacity

Description Year
1 2 3_10
Capacity utilization (%) 25 50 100

Assembled Cars(Medium Truck 3.5 ton) 150.00 225.00 300

Parts (body works) 150.00 225.00 300

2.3.  Pricing

It would be important to examine the possible level of price based on the competitor’s
action. In this connection, the existing average prices of similar assembled midum truck
(3.5 tons caring capacity) and body work services in Addis Ababa were assessed for the
benefit of comparison. Based on the existing price in the market the firm stetted the
price as follows;

Table Pricing of the Plant

Product/Service Average price Price of the the Remark

in Br. project in Br
Assembled Cars(Small 420,000.00 380,000.00 Before VAT
Truck 3.5 ton)

13
Parts (body works) 85,000.00 65,000.00 Before VAT

14
3. PRODUCTION NATURE, INPUTS, PRODUCTION, TECHNOLOGY AND CIVIL
WORK

3.1. Product Nature and Description

A car is a four wheeled vehicle that is common in the world. Cars are becoming used in
developing countries in both urban and rural areas (not widely used) for transport and for
the movement of goods. Consequently, in developing countries like Ethiopia the demand
in predominantly for the traditional heavy duty car model usually fitted with rod brakes.

The establishment of a car assembling activity would encourage the growth of auxiliary
industries like the manufacturing of tires tubes, carriers, crane guards, fenders and rims.

This envisaged plant wills assembly medium truck (3.5 tons) & parts (body works) for the
medium truck and Vans.

3.2. Raw materials and Input

The raw materials and inputs requirement of the project has to be met from imports & local
industries and large scale car assembly & parts (body works) production starts in the
country.

15
 3.3. Technology

Given the relatively finished parts are mainly imported. The operation would essentially be
confined to the manufacturing of parts (body works) and installation (assembling) of
finished parts components.

In general the following process would be required;

 Cutting, forming and bending of steel tubing and sheet

 Joining of component and forks by welding in jigs

 Painting

 Baking

 Strength testing

 Assembly of parts

 Car Assembly

Manufacturing personnel work on the assembly lines and operate numerous machines,
computers and other equipment to identify the items needed for each car. Heat treatment
tempers and strengthens the forged and cast parts, which are then shaped into
components that are assembled into subassemblies (gearboxes, axles, engines, doors,
dashboards). The chassis (the underlying frame of the automobile) and body are joined
and painted. Electricians make sure that electrical parts are correctly fitted and connected
in the car.

Components and subassemblies are gradually combined along the assembly line at
different points to construct the car. Line operators carry out one or two simple assembly
line operations. The manufacturer gives these workers limited training. At almost every
stage of the assembly process, skilled inspectors assure the quality of the work.

16
Fig- Production Flow

STEEL COILS/CUTTING

BLANKING

PRESSING

WELDING

PAINTING

FROM
FROM ASSEMBLY
VENDORS
VENDORS

VEHICLE INSPECTION FROM

VENDORS

TEST RUN

SUPPLY & DISPATCH

17
 3.4. Source of Technology

The machinery, equipment and technology of assembling can be secured from Europe,
China and Japan. In General the company will use the state of art technology of the time
in its car assembling and body work service by creating partnership and branding
agreement.

3.5. Machinery and Equipments

The following are the list of necessary machineries and equipments for the envisioned
Car assembly and parts (body work) for medium truck and Vans

 Power press and dyers

 Tube threading machine
 Shearing machine
 Drilling machine
 MIG welding equipment
 Frame and fork assembly jigs
 Phosphatizing and rinse tank
 Painting both with dipping tanks
 Load testing jig
 Grinder
 Edge folding machine
 Spraying unit
 Welding sets
 Powder coating machine
 Punching machine
 Generators
 Milling & quick cutters machine
 Laze machine
 Universal sheet folding machine
 Auxiliary equipment

18
 3.6. Project Design and Engineering

The proposed project comprises stock of different components to be executed at

different phases of the project life. These activities include: Design and Construction of
various buildings (workshops), importing of machineries, inputs and other raw materials,
import of vehicles and other tasks.

3.7. Building and Construction Works

A very simple building may suffice for an initial startup, the main consideration being the
security of the equipment and secure connections to electrical supply. The building will
have to be designed along factory production lines allowing for smooth transitioning of
the raw materials into completed products and optimized for maximum efficiencies.

3.8. Utilities

A number of utilities would be put in place in order to ensure smooth functioning of the
factory. These utilities include:

 Water Supply,

 Supplementary Electricity supply,

 Telephone line

 Paved Road Transportation,

 Drainage Facility

19
4. MANPOWER AND ORANIZATIONAL MANAGEMENT

4.1. Manpower

At the top of the organizational structure, there will be a general manager with the
responsibility of supervising the overall activity of the plant. Depending up on the nature
of the center and the amount of work to be performs; there will be auxiliary units under
the general manager. Employees under each unit will be supervised by the unit head
that is accountable for the general manager.

The company will use efficient trained staffs in the area of marketing to be competitive
in the market. The opportunities of being serviced by well skilled professionals well
enable the company to evaluate the internal weakness and strength of the company as
well as to assess the global opportunity and risks in the world market so that the
company can cope up with the dynamics of the market situation. The company will hire
850 employees.

The detail human power requirement, monthly and yearly salary is indicated in part 5
financial part.

4.2. Organizational Structure and management

The organizational structure of the project is designed by including all the necessary
personnel under the right division. At the top of the organizational structure, there will be
a general manager with the responsibility of supervising the overall activity of the plant.
Employees under each unit will be supervised by the department head that is
accountable for the general manager. General Manager is accountable to the owner of
the plant as indicated in figure below;

20
 Fig Organizational Structure

General
Manager

Audit Inspection service Quality control service &

Management representative

System design & planning service

Finance & Admin. Commercial

Manager Manager Operational Manager

Finance & General Personnel Marketing & Supply & Engineering Technical Production
Accounting Service & Admin.
Sales Procurement Department Service Department
Division Division Division
Department Department Department

Prepare & Machine

Maintenance Shop
Division Division
Sales Storage Mechanical
Division Design
& Supply
Division
Division Sheet
Metal
Customer
Process
Service
Electrical Division
Division
Design
Procurement
Division
Division Assembling
Market
Research Division
Division
Finishing
Division

21
 4.3. Training Requirement

The manufacturing employees of the plant expected to take basic metal and automotive
technology manufacturing skill training for 10 days. In addition training could be given to
the mechanic and to the supervisor will also take skill training from one of TVET
Colleges or similar undertaking factories in Addis Ababa.

22
5. FINANCIAL REQUIRMENT AND ANALYSIS

5.1. Total Initial Investment Cost

The total amount of money that is required to establish the envisaged plant is estimated
to be birr 5,000,000

Table Total Initial Investment Capital

SN Description Cost in birr

1 Land, Building & Construction

1,500,000.00
2 Machines & Equipments
1,500,000.00
3 Vehicles
1.000,000.00
4 Office Equipment
100,000.00
Total Fixed Investment Cost
3,100,001
5 Pre service Expense
50,000.00
6 Initial Working capital
900,000.00
Total
5,000,000.00
Contingency (10%)
50,000
Total Initial Investment Capital
5,000,000

23
5.1.1. Fixed Investment

A. Building & Construction

SN Description Land Unit cost in br. Total cost
Requirement(M2) in br.
1 Assembling Hall 3,500.00 7,000
2 Parts manufacturing
200.00 7,000
Hall(Body work)
3 Inputs store 500.00 6,000
4 Product shade
1000.00 6,000
(Hangar)
5 Office 500 5,000
6 Cafeteria 415 4,500
7 Generator house 50 2,500
8 Guard house 35 2,500
9 Parking 100.00 2000
10 Internal road 500.00 2000
11 Waste Accumulation
900 2000
area
12 Green Area and future
500.00 1,000
expansion
13 Fence and others    
14 Site Development    

15 Design and    
Supervision
16 Electric & water line    
installation
17 Land lease Initial Fee   6.5br per M2 for 60
years
Total  
10,000.00

24
 B. Machineries and Equipment’s
The total cost of required machineries and equipments, which is indicated the above is
estimated to be Birr 22,000,000

25
 C. Vehicles
SN Description Qty Unit Price in Total Price in Remark
br. br.
3 Pick up 1 1,890,00 Duty free
1,890,000
0
Total 1,890,000

D. Office Furniture and Equipment’s

Unit cost Total cost

No Description Qty
in Br. in Br.
1 Managerial Tables 50 108,108 540540.5
2 Secretarial chairs with table 50 54,054 270270.3
3 Managerial Chairs 50 32,432 162162.2
3 Computer and Printer 150 21,622 3243,24.3
4 Shelf 200 10,811 2162,16.2
5 Filing Cabinets 300 5,405 1621,62.2
6 Customer Chair 100 2,703 27027
7 Television 15 16,216 24324.3
8 Waiting Room with sofa   1,000,000 540,54.1
9 others related service   3,550,000 191891.9
500,0
10 Assembly chair and table(set)   270,27
00
Total     2,000,000

26
 2. Initial Working Capital
The initial working capital is estimated to be birr. 1,500,000

a. Annual Production Cost at Full Capacity1

i. Raw Materials and Inputs

The total cost of the inputs and raw materials required for car assembly and parts
manufacturing at full is estimated to be Birr 5,000,000.

Automobiles require a number of raw materials for their production. This includes
aluminum, glass and the iron ore to make steel, as well as petroleum products used to
make plastics, rubber and special fibers. ... The automobile industry is one of the largest
consumers of the world's raw materials.

What raw materials are used to make cars?

Cars are made of a wide variety of materials, such as steel, aluminum, copper, glass,
rubber, and special fibers. First, a raw material production company takes individual raw
materials and turns them into materials that can be used to make car parts, and delivers
them to parts production companies or to Toyota.

What is a raw material example?

Raw materials are used in a multitude of products. They can take many different forms.
Examples of raw materials include: steel, oil, corn, grain, gasoline, lumber, forest
resources, plastic, natural gas, coal, and minerals.

What type of metal are cars made of?

steel

Almost all cars are made with predominantly steel in them. You will find steel in the
doors, hoods, trunk and the car's frame. Steel is a strong metal that is also versatile and
easy to work with. Furthermore, it is also widely available.

1
At third year of operation

27
What are raw materials and their uses?

A raw material, also known as a feedstock, unprocessed material, or primary

commodity, is a basic material that is used to produce goods, finished products, energy,
or intermediate materials that are feedstock for future finished products.

Is steel a raw material?

98% of mined iron ore is used to make steel. As iron occurs only as iron oxides in the
earth's crust, the ores must be converted, or 'reduced', using carbon. The primary
source of this carbon is coking coal. Coal is a key raw material in steel production.

Raw Material Mining and Quality Control for Steel Manufacturing

Types of raw materials

Plant/tree-based – materials like vegetables, fruits, flowers, wood, resin, latex are
obtained from plants and trees.

Animal-based– materials like leather, meat, bones, milk, wool, silk are all obtained from
animals. Mining-based– materials like minerals, metals, crude oil, coal, etc.

ii. Salary Expense

SN Position No. Qualification Monthly Annual

Salary in Br Salary in
br.
1 General Manager MBA 14 529,
3
,700 200
2 Operational Manager BSC in
4 Mechanical/Industrial 7 378,
Engineering ,875 000
3 Line managers BSC in Mechanical 7 604,
7
Engineering ,200 800
4 Technical Inspector Diploma in Automotive 7 1,224,
13
technology ,851 720
5 Senior Mechanic Diploma in Automotive 1 4,233,
229
technology ,541 600
6 Electrician Diploma in Electricity 1 926,
50
,544 100
7 Designer 30 BSC in Auto-design 1 378,

28
 ,050 000
8 Junior mechanic 10+1 in Automotive 2 3,265,
130
technology ,094 920
9 Skilled Workers 10th/12th completed 1 1,905,
80
,985 120
10 Daily Workers Unskilled 1 1,436,
60
,995 400
11 Head, Administration & BA in Mgt/Acct 1 264,
15
Finance Dept. ,470 600
12 Personnel BA in HRM 1 136,
8
,418 080
13 Head, Commercial Dept BA in Marketing 1 264,
15
Management ,470 600
14 Sales Diploma in Sales Mgt 1 567,
25
,890 000
15 Accountant BA In Accounting 1 302,
15
,680 400
16 Cashier 10+2 in Bookkeeping 2 215,
8
,244 460
17 Secretary Diploma in Secretarial 1 136,
8
science ,418 080
18 Cleaner Unskilled 1 204,
15
,134 120
19 Store keeper Diploma in logistic mgt 1 215,
15
,197 460
20 Purchaser Diploma in supp. & Put. 1 74,
5
Mgt ,235 088
21 Guard/Security Basic 1 332,
25
,109 640
22 Driver 10 completed + 1 408,
30
certification ,134 240
23 Forklift operator 10 completed + 1 192,
15
certification ,071 780
24 Ass. Driver Basic 1 124,
10
,040 740
25 Gardner Unskilled 1 90,
5
,512 720
26 Assistance 160 Unskilled 73,000,00
27 Resaved 5,000,000
Total 1,000
Benefits (20% of Basic 5,000,
Salary) 000
Grand Total

29
 iii. Other Operating Expenses

SN Description Annual Cost in br Assumption Used

1 Property Insurance 4,260,851.39 1% of fixed Investment Cost
2 Audit & Legal Fee 1,151,200.00 2000 per month
3 Worker Uniforms 1,181,440.00 160*180br
4 Telephone, fax and postal 90,720.00 1200 per month
5 Cleaning goods supplies 105,840.00 1400 per month
6 Repair and maintenance 6,521,702.78 2 % of the Fixed Cost
7 Advertisement 6,095,000.00 % of sales
8 Stationery and other office 800 per month
supplies 1,60,480.00
9 Electricity 1,575,000.00 1.25*200,000KW per year
10 Water 1, 50,400.00 2 br.*4,000m3 per year
11 Fuel 410,000.00 35000 lit*20 per year
12 Oil and lubricant 441,000.00 10% Oil and lubricants
13 Spare parts 2,260,851.39 1% of fixed Investment Cost
14 Miscellaneous Expense 378,000.00 5000 per month
Total 300,000.56

Pre-Service Expense
SN Description Total Cost in br

1 Project proposal 50,000

2 Environmental Impact Assessment 100,000

3 Staff Capacity Building 26,100

4 Licensing fee and others 50,000

5 Promotion Adverting 74,000

  Total 200,000

30
 b. Financial Analysis and Statements

i. Underlying Assumption

The financial analysis of the envisioned plant is based on the data provided in the
preceding sections and the following assumptions.

A. Construction and Finance

Construction period 26 months

Source of finance 30% equity and 70% loan

Tax holidays 2 years

Bank interest rate 10 %

Operating Costs increase by 5% after year 3

Raw materials and wages increase by 5% after year 3

Salary and wages increase by 3 % after year 3

Sales price increased by 6% after year 3

B. Depreciation

Building 5%

Machinery and equipment 10%

Office furniture 10%

Vehicles 20%

31
 C. Working Capital

Accounts receivable 30 days

Raw material local 30days

Raw materials, import 90 days

Work in progress 5 days

Finished products 30 days

Cash in hand 5 days

Accounts payable 30 days

ii. Sources of Fund

SN Description % share Amount(in birr)

1 Owners Share 30 1,500,000

2 Bank Loan 70 3,500,000

Total 100 5,000,000

32
 iii. Loan repayment Schedule

Principal Total Annual Remaining

Year Interest (10%)
Payment Payment Balance
0 0 0 0 3,500,000
1 350,000 350,000 140,000,000 61,500,000
2 350,000 700,000 133,000,000 560,000,000
3 350,000 600,000 126,000,000 490,000,000
4 350,000 400,000 119,000,000 420,000,000
5 350,000 200,000 112,000,000 350,000,000
6 350,000 100,000 105,000,000 280,000,000
7 350,000 500,000 98,000,000 210,000,000
8 350,000 500,000 91,000,000 140,000,000
9 350,000 3500,000 84,000,000 350,000
10 350,000 350,000 7350,000 0

iv. Depreciation Schedule

Original Depreciation Depreciation
SN Description
Value In Birr rate in % Per year
Construction and Civil
1 1,500,000 5 100,000
Work
Machines &
2 1,500,000 15 100,000
Equipment’s
3 Vehicles 1,800,000 20 1800,000

4 Office Equipment 200,000 15 200,000

  Total 5,000,000   2,200,000

33
 v. Revenue Projection

Based on the price and the capacity program of the factory indicated in previous chapter
(chapter 2), the revenue of the plant projected at full capacity 2 is shown in the table
below;

Table Revenue projection

Description Year 1 Year 2 Year 4_10

Assembled Cars(Medium Truck 3.5 359, 538,650,00 718,200,0
ton) 100,000 0 00
Parts (body works) 61, 92,137,5 122,850,0
425,000 00 00
Total 420, 630,787,50 841,050,0
525,000 0 00

vi. Balance Sheet

Balance Sheet
Asset
Current Asset  
Cash 1500,000
Inventory of raw materials and inputs 200,000
Total Current Asset 3,500,000
Fixed Asset  
Land, Building and Construction 2300,000
Machineries and Equipment’s 2,000,000
Office Equipment 20,000,000
Vehicles 1,500,000
Total fixed Asset 5,000,000
Total Asset  
Liability  
Account payable 3,500,000
Owners Equity 1,000,000
Capital  
Total Liability & Owners’ Equity 5,000,000

34
 vii. Income Loss Statement

Revenue Year 1 Year 2 Year 3-10

Sales 420,525,000 630,787,500 841,050,000
Sales expenses (5%)* 21,026,250 31,539,375 42,052,500
Purchase of Raw Material 200,000,000 265,075,095 265,075,095
Gross profit 220,525,000 365,712,405 575,974,905
Expenses    
Salary Expense 100,000,000 105,000,000 110,250,000
Operating Expenses 1,500,000 31,500,000 33,075,000
Pre-operating Expense 20,000,000 21,000,000 22,050,000
Deprecation Building 14,000,000 14,000,000 14,000,000
Deprecation machine 33,000,000 33,000,000 33,000,000
Deprecation Vehicles 6,000,000 6,000,000 6,000,000
Deprecation office Equip 3,000,000 3,000,000 3,000,000
Lease Expense 16,340,000 16,340,000 16,340,000
Interest Expense 350,000 63,000,000 350,000
Total Expense  292,340,000 292,840,000 244,715,000
Profit Before Tax 420,525,000 630,787,500 841,050,000
Tax(30% ) 126,157,500 189,236,250 252,315,000
Net Profit 294,367,500 441,551,250 588,735,000

35
 viii. Cash Flow Statement
Cash Flow Statement        
         
Pa+A45:E59ticulars Year0 Year I Year II Year III-XI
A. Cash Inflow 0      
·  Own equity 300,000,000      
·  Bank loan 3,500,000      
·  Depreciation 0 56,000,000 56,000,000 56,000,000
·  Net profit 0 294,367,50 441,551,25 588,735,00
0 0 0
Total inflow 350,367,50 497,551,25 644,735,00
5,000,000 0 0 0
B.  Cash outflow 0      
·   Fixed capital 3,500,000      
·  Working capital 1,500,000      
. Contingency (Lump sum) 5000,000    
10%  
·  Loan repayment   350,000 63,000,000 350,000
Total outflow 5,000,000 350,000 63,000,000 350,000
Net inflow (A-B) 280,367,50 434,551,25 637,735,00
0 0 0 0
Cumulative balance 280,367,50 434,551,25 637,735,00
0 0 0 0

36
 ix. Profitability

According to the projected income statement, the project will start generating profit in
the 2nd year of operation. Important ratios such as profit to total sales, net profit to equity
(Return on equity) and net profit plus interest on total investment (return on total
investment) show an increasing trend during the lifetime of the project.

The income statement and the other indicators of profitability show that the project is
viable.

x. Break-Even Analysis

The break-even point of the project including cost of finance when it starts to operates
at full capacity (year 3) is estimated by using income statement projection.

BE = Fixed Cost / Sales – Variable cost = 61%

xi. Pay-Back Period

The investment cost and income statement projection are used to project the pay-back
period. The project's initial investment will be fully recovered with in 5 year of operation.

3. FUTURE DEVELOPMENT

Every business undertakings be it large or small should have future development plan.
It is a plain fact that business activities are undertook in a dynamic business nature and
different environment. Therefore, the plant will have an expansion phase depending on
the condition of the industry character particularly in manufacturing cars, product mix
and spare parts in the plant.

37
 4. ENVIRONMENTAL IMPACT OF THE PROJECT

a. Socio-Economic Environment

The owner will provide the land on lease bases, and all required compensation will be
paid for the project. The Livelihood of the local peoples around the project area is rural
dwellers of various occupation and economic background.

b. Environmental Impact Assessment of the Project

Currently the issue of environment and development has got a due emphasis and thus
firms should do their business in a manner that they will not affect the natural
environment adversely.

Therefore, as the nature of the project is a manufacturing type and the analysis of the
expected negative impacts are elaborated as follows.

a) Land use change

Due to the project, the land use will be changed from plain land to Car Assembling,
Parts Manufacturing factory plant for the project life years. Thus, it creates no shortage
of any supply; rather it gives beauty to the surrounding area. The project will dispose the
soil due to construction in a right area. again, it will sprinkle water on the surface to
protect dust.

b) Noise Pollution

There is minimal noise pollution created by the envisaged project. Therefore, for
mitigating such impact the project will use sound proofing equipments.

38
 c) Air Pollution
There is no air pollution created by the envisaged project.

d) Water and Soil Pollution

Some of the wastes expected to generate from this project includes oil products
residual, toilet waste and office waste and discarded items from packaging items.

e) Degradation of Land
There is no degradation of land created by the envisaged project.

To assess the impacts and design mitigation measure if any adverse impacts are there
so as to make the project benefited more society and nation.

39