Kenyans to pay more for vehicles purchased locally

Kenyans will have to part with more money when purchasing a vehicle in the country after the East African Community Council of Ministers approved an application by Kenya to raise duty on motor vehicles under the common external tariff.

This will increase import duty from 25% to 35%, further exacerbating the prices of vehicles that have been pushed up by the depreciation of the shilling against the dollar.

If you are planning to purchase a vehicle in the foreseeable future then you will have to increase your budget by at least Ksh.200,000 after the new import duty came into effect.

Industry players say the new prices will affect the ability of Kenyans to purchase vehicles as the tax jump is considered to be on the higher side.

"The 10% is high for Kenyans looking to purchase a car, looking at the economical vehicles we have like the Probox, this has already gone to Ksh.1.2 million from Ksh.900,000 because of the dollar so you can imagine what the new tax will mean for buyers," Peter Kinge, a vehicle dealer told Citizen Digital.  

Further, the dealers say the final price of a vehicle is usually 50% of the landing cost. With an example of such a unit which was imported for Ksh.600,000 but when subjected to import duty, excise duty and VAT the cost of the vehicle stands at Ksh.1.4 million.

"For the current price, this car can shoot to Ksh.1.4 million and that is factoring in the 200k jump which will be borne by the final user," Tim Mbae, another vehicle dealer, said.

The dealers further say that the weakening of the shilling against the dollar had already driven the cost of importation higher than it was a few years ago, driving down their sales.

"We have seen our sales go down dramatically due to the dollar strengthening against the shilling and we anticipate the new taxes will have a similar effect," said Kinge.

And for those thinking of buying from the local used car market they are out of luck as well since they also monitor the movements of the taxes and the dollar and price their cars accordingly.

"Looking at a car that was in the market for 2 years, it will also go up in price because they will be monitoring how we price our vehicles and they adjust accordingly," said Mbae.

According to official data, Kenya imports an average of 81,791 fully built vehicles every year and has an installed vehicle assembly capacity of 34,000 units.