Weaker shilling, import duty hurt sale of small cars

The number of personal cars bought by Kenyans dropped for the first time in four years following the depreciation of the shilling, hikes in interest rates and import duty.

Kenyans bought 68,489 family cars — saloons and station wagons — last year compared to 69,444 the previous year, a drop of 955 units, according to Kenya National Bureau of Statistics data.

“When the issue of excise duty started being discussed by parliament people got concerned and held back — in fact even now our suppliers in Japan are calling concerned over low figures,” said Charles Munyori, the secretary general of Kenya Auto Bazaar Association, which represents used car dealers.

KNBS records the numbers of registered vehicles which represents new and used cars. Second-hand car dealers are dominant in Kenya, accounting for about 80 per cent of total vehicles sold, relying on demand from businesses and individuals unwilling or unable to pay showroom prices.

The Treasury enforced a new excise duty regime in December last year. The new tax had however been approved in July but encountered delays in implementation.

The tax regime has hit buyers of small cars hardest while comparatively lowering the liability for luxury vehicles.

READ: New tax hits small car buyers hard as duty on luxury vehicles drops

Depreciation of the shilling last year, to lows of Sh107 against the dollar, pushed up the price of imports including for cars.

Cost of financing also went up following a spike in interest rates to above the 20 per cent as Central Bank moved to stabilise the currency.

Most cars are purchased through bank loans with data from CBK showing loans to private households grew by 9 per cent last year compared to 15 per cent in 2014.

New personal car registrations dropped last in 2011 when the country was also faced with a weak currency and high interest rates. The drop in personal car sales further paints a grim picture of the Kenyan economy which has seen 18 listed companies issue profit warnings and Kenya Revenue Authority miss its collection targets. KRA attributed the below target performance to job cuts, stagnant salaries and lower imports.

The number of saloon cars registered dipped for the third year in a row to 14,369 units from 15,902 a year earlier while station wagons rose to 54,120 from 53,542 units in 2014 underlining the Kenyan preference for station wagons.

More spacious

The liking for station wagons has been attributed to them being more spacious allowing for more diversified use including as public service vehicles. Car importers however queried the data noting that the demand for saloon cars was still high.

“This is one thing that I don’t understand because majority of the cars that come in are saloons, so it may be an issue of classification,” said Mr Munyori.

The number of newly registered pick-ups, vans, buses, lorries, trailers and tractors picked up indicating optimism among commercial vehicle users.

The number of registered motorcycles increased by 21.1 per cent to 134,645 units riding on the growing popularity of boda bodas. Motorcycles are a preferred means of transport especially in rural areas.