Economy

Acute shortage of logbooks stalls sale of motor vehicles

A three-week shortage of logbooks has stalled the registration of motor vehicles, hitting dealers and buyers, and denying the country millions of shillings in revenues.

The Business Daily Tuesday learned that the shortage has totally crippled the transfer of motor vehicles and motorcycles to buyers, putting a strain on dealers whose stocks are not moving.

Used motor vehicle dealers yesterday said they were stuck with stocks in their yards as most customers are not willing to buy vehicles without logbooks.
Those using commercial bank loans to buy private cars and passenger service vehicles (PSV) have been unable to get the vehicles on the road because banks cannot release the vehicles without the logbooks that serve as collateral.

“It has become difficult to sell cars without logbooks since customers are demanding that we deliver the books before closing a deal,” said Charles Munyori, the secretary-general of the Kenya Auto Bazaar Association (Kaba) — the lobby for second hand car dealers.

A similar crisis hit the sector in August 2012, hurting businesses.

This means dealers cannot order new units, crippling activity in the sector that employs thousands of Kenyans. Kenya imports 4,000 used vehicles every month, according to Mr Munyori, and each requires fresh registration to operate in the local market.

The National Transport and Safety Authority (NTSA) — the agency in charge of vehicle registration and licensing — attributed the shortage to delays in procurement of logbook copies.

NTSA director-general Francis Meja said the agency ran out of logbooks following the recent expiry of a supply contract with a foreign printing firm and a delay in sourcing a new supplier.

Undergoing clearance

Mr Meja said the fresh tendering was done and that a new batch of logbooks has been delivered at Jomo Kenyatta International Airport (JKIA).
“As we speak the logbooks are undergoing clearance at the airport and will be ready for issuance from today (Wednesday),” he said without naming the new suppliers.

Most Kenyans prefer imported used cars that are cheaper and mostly use bank loans to buy them, making the registration documents a critical element of the vehicles market.

READ: KRA logbooks crisis slows down motor vehicle sales

The logbooks crunch has, therefore, hurt prospective buyers, slowed down dealers’ businesses and denied the government revenues from vehicle transfer charges.

A freeze in importation of new units because of the logbooks shortage also denies the Kenya Revenue Authority (KRA) cash from taxes.

The shortage is particularly injurious to dealers who suffered a 29.1 per cent drop in new vehicle sales in the first half of the year to 7,154 units, attributed to increased taxes and high interest rates that subdued demand.

The NTSA has promised to clear the heavy logbooks issuance backlog in order to return the automobile market to normalcy.

The shortage has been a double whammy to the economy having stalled private businesses and denied government revenues from NTSA’s transfer charges. 

The Matatu Owners Association (MOA) yesterday said that a number of investors in public transport had been affected, freezing their cash flows.

“Our members who took loans to buy vehicles cannot get letters of release from the banks to put them on the road,” MOA chairman Simon Kimutai said.
PSV operators have in the past complained that they cannot get Transport Licensing Board (TLB) licences to operate without logbooks.

The delay in releasing the vehicles therefore means investors run the risk of delaying payment of the loans and recouping their investments.

Most banks accept logbooks to advance loans to borrowers. Motorcycle buyers, especially in small towns, often turn to microfinance institutions for loans to purchase the units.

Mr Kimutai described the logbooks as “very simple papers that should be easy to produce and the shortage unacceptable.” 

Further delay in the issuance of the logbooks could also affect the insurers who have a three-month window within which they can issue a cover without a logbook.

This is because all interim covers must be cancelled if the owner fails to present the logbook during the grace period and no claims can be processed in the event that a car with no logbook is involved in an accident.

A series of taxes introduced in recent years has seen the price of new vehicles rise by up to Sh1.2 million per unit, which dealers say has seen customers scale down their purchases or opt for used car imports that can be up to 50 per cent cheaper.

Units of cars imported dropped to 25,953 in the first five months of the year from 35,224 in a similar period a year earlier following the coming into force of a tax law that made the top-end-of-the-market ones more expensive by up to Sh1 million.

The Treasury in June 8 abandoned the flat rate duty of Sh200,000 for vehicles older than three years and Sh150,000 for newer ones introduced in December, in favour of the previous 20 per cent levy of the car’s value.

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