PROJECT PROPOSAL FOR HEAVY TRUCK ASSEMBLY, BODY&

PARTS MANUFACTURING PLANT

PROJECT TO BE IMPLEMENTED IN SHEGER GELAN
SUB_CITY OROMIA REGION STATE

PRMOTER-HABTAMU DAREJE AND HIS FRIENDS MICRO

ENTERPRISE

April, 2023

FINFINE, 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 Heavy truck Assembly & Parts Manufacturing Plant

2. Project Owners Habtamu Daraje and his friends micro enterprise

3. Nationality Ethiopian

4. Project Gelan sub-city , Oromia region

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

6. Premises Required 1hectares

7. Total Br. 6,000,000of which 30% equivalent to Br. 1,800,000financed by the

owners equity and the rest 70% equivalent to br. 4,200,000 financed
Initial Investment
Capital through bank loan

8. Employment 80 persons
Opportunity
Permanent workers 60
Skilled 20
Unskilled 40
Temporary workers 30
Skilled 20
Unskilled 10
9. Benefits of the Assembled and supply quality Heavy trucks and body work service, add
factory For The
value to the economy, Source of Revenue, Employment opportunity,
Region/ Country
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, Heavy truck 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 Gelan Sub-city, Oromia
regional State, and Heavy truck 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, Heavy truck 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 Heavy truck 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 Heavy truck assembly and manufacturing factory has a great impact to alleviate
this problem. Therefore, establishment of Heavy truck 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:

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 A. Supply of Quality Assembled Heavy truck and Body work

The project under discussion will provide quality and fair priced assembled Heavy truck 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 820 persons.

E. Save the Country’s Foreign Exchange

By minimizing the market gab for Heavy trucks 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 (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 Heavy trucks 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.

Product mixes and Services rendered by the company

I. The Product Mixes of the Company are:

❖ 3-axle draw bar dry cargo truck-trailer

❖ 3-axle dry cargo semi-trailer
❖ 2-axle dry cargo semi-trailer
❖ Low bed-60 ton
❖ 3-axle draw fuel cargo truck trailer
❖ 3-axle fuel cargo semi- trailer
❖ Dump Truck-Afro & Miller type (10m3, 14m3)
❖ Antenna must (up to 60 meter height)
❖ Under ground and over ground tanker
❖ Crusher (25-100 t/h)
❖ Petroleum Reservoirs tanks (5000m3-5600m3)
❖ Overhead crane (10t, 5t, 2t)
Bus body (40+1, 60+1 seat

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 1.4. Location and Premises Required

i. Location

The envisioned project is planned to be located in sub-city (which is around 20Kms from the
capital), Gelan sub-city 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

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  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 Heavy truck assembly business .

ii. Premises Required

The total land holding of the project is 1hectares t h e premises required planned as
follows in table below;

Table Premises Required and Land Use Plan

SN Description Land Requirement(M2)

1 Assembling Hall 2000

2 Parts manufacturing Hall(Body Work ) 2500
3 Inputs store 1000
4 Product shade (Hangar) 500
5 Office 500
6 Cafeteria 400
7 Generator house 100
8 Guard house 100
9 Parking 1000
10 Internal road 500
11 Waste Accumulation area 200
12 Green Area and future expansion
1200
Total 10000

9
10
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 Heavy truckts 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.

11
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 Heavy truck 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 Sheger in Gelan sub –city
is 300 Heavy trucks & 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 Heavy truck. 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.

The main target markets for the planned plants are:

 General Public
12
  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.

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 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 Heavy trucks(Medium Truck 3.5 150.00 225.00 300

ton)
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 Heavy
trucking 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 of the the Remark

price in project in Br
Br.
Assembled Heavy trucks(Small 420,000.00 380,000.00 Before VAT
Truck
3.5 ton)
Parts (body works) 85,000.00 65,000.00 Before VAT

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

3.1. Product Nature and Description

A Heavy truck is a four wheeled vehicle that is common in the world. Heavy trucks 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 Heavy truck model usually fitted with
rod brakes.

The establishment of a Heavy truck assembling activity would encourage the growth of auxiliary
industries like the manufacturing of tires tubes, Heavy truckriers, 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 Heavy truck assembly & parts (body works) production starts in the
country.

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

15
 Baking

16
  Strength testing

 Assembly of parts

 Heavy truck Assembly

Manufacturing personnel work on the assembly lines and operate numerous machines, computers
and other equipment to identify the items needed for each Heavy truck. 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 Heavy truck.

Components and subassemblies are gradually combined along the assembly line at different
points to construct the Heavy truck. Line operators Heavy truckry 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.

17
Fig- Production Flow

STEEL COILS/CUTTING

BLANKING

PRESSING

WELDING

PAINTING

FROM
FROM ASSEMBLY
VENDORS
VENDORS

VEHICLE INSPECTION FROM

VENDORS

TEST RUN

SUPPLY & DISPATCH

18
 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 Heavy
truck 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 Heavy
truck 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

19
 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

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 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;

21
 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 &
Accounting
General Personnel Marketing & Supply & Engineering Technical Production
Service & Admin.
Division Sales Procuremen Department Service Department
Division Division
Department t

Prepare & Machine

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

Finishing
Division

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 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.

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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
6,000,000

Table Total Initial Investment Capital

SN Description Cost in birr

1 Land, Building & Construction

1,140,000
2 Machines & Equipments
2,000,000
3 Vehicles
861,000.00
4 Office Equipment
161,000.00
Total Fixed Investment Cost 0

5 Pre service Expense

26,100.00
6 Initial Working capital
1,500,189.00
Total
0
Contingency (5%)
50,000.00
Total Initial Investment Capital
6,000,000

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5.1.1. Fixed Investment

A. Building & Construction

SN Description Total cost in br.

1 Assembling Hall
860,000
2 Parts manufacturing
Hall(Body work) 639,000
3 Inputs store
59,000
4 Product shade
(Hangar) 525,600
5 Office
75,000
6 Cafeteria
24,235
7 Generator house
50,400
8 Guard house
5,125
9 Parking
5,100
10 Internal road
54,000
11 Waste Accumulation
area 51,200
12 Green Area and future
expansion 740,500
13 Fence and others
819,000
14 Site Development
945,000
Total
0

25
 B. Machineries and Equipment’s
The total cost of required machineries and equipments, which is indicated the above is
estimated to be Birr 144,900,189

26
 C. Vehicles
SN Description Qty Unit Price in Total Price in Remark
br. br.
3 Pick up 1 Duty free
1,890,000 1,890,000
Total 1 1,890,000

D. Office Equipments
SN Description Qty Unit cost in
Br.
1 Managerial Tables with chair 1 26,460
2 Secretarial chairs 1
7,560
3 Office tables 1
9,450
4 Office Chairs 1 5,040
5 Computer with its printer 1 94,500
6 Shelf 1
22,050
7 Telephone and fax machine 1
10,710
8 Filing Cabinets 1
11,970
9 Decoration(Curtain, Sofa & LS 99540
Heavy truckpet)
10 Assembly set 1
Total

27
 E. Initial Working Capital
The initial working capital is estimated to be birr. 1,800,000

F. Pre-Service Expense
SN Description Total Cost in br

1 Project proposal 5,000

2 Environmental Impact Assessment 10,000

3 Staff Capacity Building 726,100

4 Licensing fee and others 50,000

Total 791100

5.2. Annual Production Cost at Full Capacity1

i. Raw Materials and Inputs

The total cost of the inputs and raw materials required for Heavy truck assembly and parts
manufacturing at full is estimated to be Birr 10,687,500.00.

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 Heavy trucks?

Heavy trucks 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

1
At third year of operation

28
materials and turns them into materials that can be used to make Heavy truck 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 Heavy trucks

made of? steel

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

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 Heavy truckbon. The primary source of
this Heavy truckbon 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.

29
 ii. Salary Expense

SN Position No. Qualification Monthly

Salary in Br

1 General Manager MBA

1 14,700
2 Operational Manager BSC in
1 Mechanical/Industrial
Engineering 7,875
3 Line managers BSC in Mechanical
1 7,200
Engineering
4 Technical Inspector Diploma in Automotive
12
technology 7,851
5 Senior Mechanic Diploma in Automotive
9
technology 1,541
6 Electrician Diploma in Electricity
5 1,544
7 Designer BSC in Auto-design
3 1,050
8 Junior mechanic 10+1 in Automotive
2 2,094
technology
9 Skilled Workers 10th/12th completed
10 1,985
10 Daily Workers Unskilled
10 1,995
11 Head, Administration & BA in Mgt/Acct
1 1,470
Finance Dept.
12 Personnel BA in HRM
1 1,418
13 Head, Commercial Dept BA in Marketing
1
Management 1,470
14 Sales Diploma in Sales Mgt
2 1,890
15 Accountant BA In Accounting
1 1,680
16 Cashier 10+2 in Bookkeeping
1 2,244
17 Secretary Diploma in Secretarial
1 1,418
science
18 Cleaner Unskilled
2 1,134
19 Store keeper Diploma in logistic mgt
1 1,197
20 Purchaser 1 Diploma in supp. & Put.

30
 Mgt 1,235
21 Guard/Security Basic
2
1,109
22 Driver 10 completed +
1 certification 1,134
23 Forklift operator 10 completed +
1
certification 1,071
24 Ass. Driver Basic
1
1,040
25 Gardner Unskilled
2
1,512
Total
73
Benefits (20% of Basic
Salary)
Grand Total

iii. Other Operating Expenses

SN Description Annual Cost in br Assumption Used

1 Property Insurance 2,260,851.39 1% of fixed Investment Cost
2 Audit & Legal Fee 151,200.00 2000 per month
3 Worker Uniforms 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 4,521,702.78 2 % of the Fixed Cost
7 Advertisement 4,095,000.00 % of sales
8 Stationery and other office 800 per month
supplies 60,480.00
9 Electricity 1,575,000.00 1.25*200,000KW per year
10 Water 50,400.00 2 br.*4,000m3 per year
11 Fuel 4,410,000.00 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 20,582,485.56

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5.3. Financial Analysis and Statements

5.3.1. 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%

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C. Working Capital

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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

5.3.2. Sources of Fund

SN Description % share Amount(in birr)

1 Owners Share 30 1,800,000

2 Bank Loan 70 4,200,000

Total 100 0

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5.3.3. Loan repayment Schedule
Principal Interest Total Annual
Year Remaining Balance
Payment (10%) Payment
0 0 0 0 81,431,100
1 8,143,110 8,143,110 16,286,220 73,287,990
2 8,143,110 7,328,799 15,471,909 65,144,880
3 8,143,110 6,514,488 14,657,598 57,001,770
4 8,143,110 5,700,177 13,843,287 48,858,660
5 8,143,110 4,885,866 13,028,976 40,715,550
6 8,143,110 4,071,555 12,214,665 32,572,440
7 8,143,110 3,257,244 11,400,354 24,429,330
8 8,143,110 2,442,933 10,586,043 16,286,220
9 8,143,110 1,628,622 9,771,732 8,143,110
10 8,143,110 814,311 8,957,421 0

5.3.4. Depreciation Schedule

Amount of
values of Capital Rate of
No Capital Assets Depreciation
assets (Br.) depreciation (%)
estimated (Br.)

Land, Building
1 and Construction 2,140,000 5 2,876,958
Machines and
2 Equipment’s 900,000 15 21,735,028
Vehicles and
3 Motors 861,000.00 15 3,279,150
Office Equipment
4 861,000.00 20 356,958

Total 6,000,000 28,248,094

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5.3.5. 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 capacity2 is shown in the table below;

Table Revenue projection

Description Year 1 Year 2 Year 4_10

Assembled Heavy trucks(Medium
Truck 3.5 ton) 29,100,000 38,650,000 38,200,000
Parts (body works)
11,425,000 12,137,500 32,850,000
Total
0 0 0

5.3.6. Balance Sheet

Asset
Current Asset Value in Br.
Cash 3,851,671.40
Inventory of raw materials and inputs 1,800,000
Total Current Asset 5651671.4
Fixed Asset -
Land, Building and Construction 2,140,000
Machineries and Equipments 4.900,000
Office Equipment 61,000.00
Vehicles 1,861,000.00
Total fixed Asset 15370242.8
Total Asset 6,000,000
Liability -
Account payable 4,200,000
Owners Equity -
Capital 1,800,000
Total Liability & Owners’ Equity 6,000,000

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5.3.7. Income Loss Statement
Revenue Year 1 Year 2 Year 3_10
Sales Revenue
420,525,000 630,787,500 841,050,000
Purchase of Raw Material &
Inputs 380,598,750 507,465,000 634,331,250
Gross profit
39,926,250 123,322,500 206,718,750
Expenses
- - -
Salary Expense
3,255,825 17,674,433 22,093,042
Other Operating Expenses
349,491 16,465,988 20,582,486
Deprecation Building
876,958 2,876,958 2,876,958
Deprecation Vehicles
372,200 4,372,200 4,372,200
Deprecation Machineries & equp.
490,019 14,490,019 14,490,019
Deprecation office Equip
178,479 178,479 178,479
Interest Expense
1,000,590 17,100,531 15,200,472
Lease payment
701,000 1,701,000 1,701,000
Total Expense
0 74,859,609 81,494,655
Profit Before Tax
(2,298,312) 48,462,891 125,224,095
Tax(30% ) 37,567,228
Net Profit
(2,298,312) 48,462,891 87,656,866

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5.3.8. Cash Flow Statement
Year Year 0 Year 1 Year 2 Year 3-10
Equity Capital
1,800,000 - - -
Loan principal
4,200,000 - - -
Net sale
- 420,525,000.00 630,787,500.00 841,050,000.00
Total cash in flow
6,000,000 20,525,000.00 30,787,500.00 41,050,000.00
Cash payment
- - - -
Purchase of raw
materials - 38,598,750.00 57,465,000.00 63,331,250.00
Pre operating
expense 926,100.00 - - -
Investment
6,000,000 - - -
Other Operating
cost - 12,349,491.34 16,465,988.70 20,582,485.56
loan repayment
- 38,001,179.92 36,101,120.90 34,201,061.94
Lease payment
7,371,000.00 567,000.00 567,000.00 567,000.00
Tax payment
- - - 7,723,583.72
Total payment
34,382,239.00 43,51,421.00 56,599,111.80 69,681,796.30
Cash surplus /
Deficit 37,054,760.40 (10,991,421.25) 70,188,390.66 151,368,202.50
Cumulative cash
flow 37,054,760.40 26,063,339.15 96,251,729.81 247,619,932.31

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5.3.9. 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.

5.3.10. 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%

5.3.11. 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.

6. 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 Heavy trucks, product mix and spare parts in
the plant.

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7. ENVIRONMENTAL IMPACT OF THE PROJECT

7.1. 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.

7.2. 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 Heavy truck
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.

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 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 disHeavy truckded 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.

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