Second-hand cars set to become more costly

The price of importing second-hand vehicles into the country is set to go up following proposals by Treasury to impose new levies on motor vehicle imports.

The Excise Duty Bill, 2015, presented by Treasury Cabinet Secretary Henry Rotich to Parliament recently, proposes the introduction of levies of as high as Sh200 000 on some classes of imported second-hand vehicles.

Motor vehicle dealers in the country now state that if the bill goes through, the charges will be passed onto consumers with the price of imported cars set to rise by between Sh150,000 and Sh250,000.

“Treasury has proposed that vehicles that are between one and three years old should attract a Sh150,000 levy and those that are more than three years Sh200,000,” explained Kenya Auto Bazaar Association (Kaba) Secretary General Charles Munyori. “These charges are in addition to what importers already pay to the Kenya Revenue Authority (KRA) and if allowed to go through, vehicles will become too expensive because importers will have no other choice but to pass on the new costs to consumers,” he said.

Mr Munyori said that while the charges have been introduced to promote the local vehicle industry, the results will not yield the expected results. “The idea is to protect local motor vehicle dealers but more than 90 per cent of the vehicles on Kenyan roads are second hand,” he explained.

“If we introduce these charges, the overall cost of importing cars will be prohibitive to prospective motorists and that will cut volumes of imports so KRA might will not necessarily collect more revenue,” he said. Treasury Cabinet Secretary Henry Rotich said the measures were also being introduced to curtail harmful effects on the environment caused by over-aged vehicles.

Earlier this year the United Nations and the Ministry of Energy made proposals to give vehicle importers incentives for importing fuel efficient and hybrid vehicles.

Piecemeal reviews

In addition to this, the Energy Regulatory Commission suggested lowering the age limit of imported cars from eight years to five years to prevent the entry of “dirty” cars into the Kenyan market.

Motor vehicle dealers are however, cautioning that piecemeal reviews of the vehicle importation laws will not work unless the laws are harmonised across the entire East African region. “It does not make sense to lower the age limit in Kenya alone and having Uganda and Tanzania maintain their existing tariffs because importers will soon use these markets to bring in vehicles and Kenya will end up losing revenue,”noted Munyori.

The volume of imported cars in Kenya has increased exponentially in the last ten years as increased availability of credit and a growing middle-class fuelled demand.

According to data from the Kenya National Bureau of Statistics, KNBS, in 2003 the number of vehicles imported into the country stood at 33,000.

By 2012, this number had grown by more than 300 per cent to stand at 110,474 units. In the same period, the number of motorcycles registered also increased nearly three times over from 51,855 in 2008 to 140,153 in 2011.

The UN projects that going by the current trend of 10-12 per cent growth per annum in vehicle imports, there will be five million vehicles on Kenyan roads by 2030 and 8.7 million by 2050.