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Let car dealers pass tax benefit to users

By The Standard | February 23rd 2020

A number of car dealers have announced plans to assemble vehicles in Kenya to cut costs and also to benefit from tax incentives provided by the government. Simba Corp has announced it would start assembling Mahindra double cabin pick-ups locally, a day after Toyota Kenya, which currently assembles Land Cruiser pick-up trucks, Hino trucks and Toyota Hilux in the country, said it would also add more models into its car assembling line locally.

Other firms that have been assembling vehicles locally include Volkswagen, which in 2017 started assembling its Polo Vivo in Kenya and the French firm Peugeot that assembles two passenger car models locally. Others include Renault Trucks that opened a local assembly plant in Thika. The vehicle dealers are exempted from the 25 per cent import duty levied on fully-built imported vehicles, an incentive that gives room for assemblers to produce cheaper vehicles.

Beside tax breaks, the government requires State agencies to give preference to automakers with local assembly lines when buying new vehicles. Despite these firms getting the many incentives, the country has not witnessed any sharp increase in new car sales.

According to the Kenya National Bureau of Statistics, in the nine months to September 2019, Kenyans registered nearly 250,000 vehicles that ranged from motorcycles and saloon cars to buses and trailers, but locally assembled units accounted for just about two per cent. This could mean the cost of the vehicles may still be prohibitive for most Kenyans who are opting to buy second hand cars. The dealers should pass the tax benefits they get to consumers. That way, everyone benefits— the consumer, the economy and the car maker.

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