Data from Kenya National Bureau of Statistics shows that 35,999 motorcycles were registered in the first half of the year, compared to 83,876 units in the same period a year earlier, representing a 57 per cent drop.
Dealers attribute the drop to expensive motorcycles after the government introduced a 16 per cent tax on the two-wheelers.
The cheap imported bikes used to retail at an average of Sh60,000 mid-last year, but have since risen to Sh75,000.
Sales in Kenya’s once-booming motorcycle business have shrunk by more than half in the six months to June, hit by the rising cost of bikes following introduction of value added tax (VAT) in September last year.
Data from Kenya National Bureau of Statistics shows that 35,999 motorcycles were registered in the first half of the year, compared to 83,876 units in the same period a year earlier, representing a 57 per cent drop.
Dealers attribute the drop to expensive motorcycles after the government introduced a 16 per cent tax on the two-wheelers.
“We used to sell at least 10 motorcycles a day but now we are doing an average of three,” said a shop attendant at Setmax Enterprises, a bikes and spare parts shop, based at River Road in Nairobi.
“Quite a huge number of people entered the boda boda business and competition is stiff. We suspect that a number may be getting out and selling their bikes at a huge discount.”
The cheap imported bikes used to retail at an average of Sh60,000 mid-last year, but have since risen to Sh75,000.
For instance at Setmax Enterprises, the Dayun brand is selling at Sh75,000, up from Sh65,000 before sales tax was imposed. The premium Boxer brand is going for Sh106,500 from Sh86,000.
Kenya enacted the value added or sales tax in September, slapping taxes and sending the retail price of various goods higher as well as pushing inflation to a 15-month high.
“The higher prices of motorcycles are reflection of the levy (VAT), which could be a pointer to the drop in sales,” said Jerry Midiwo, an executive at Honda Motorcycle Kenya.
Annual demand for motorcycles in the country rose from 16,293 units in 2007 to 140,215 in 2011 and 125,058 last year on the increased use of the bikes in public transport. Dealers attribute the jump to the removal of the 16 per cent VAT on bikes with an engine capacity of less than 200cc in 2007 that lowered prices.
Burden
The VAT burden has added pressure on the dealers who already pay 25 per cent duty on fully-built imported bikes and 10 per cent on kits used for local assembly.
The Kenya Revenue Authority has since September registered about 6,000 bikes per month in the half-year period to June compared to between 12,000 and 17,000 in the same period last year.
This is set to jolt the boda boda business that has in recent years created thousands of jobs, especially in the rural areas. The drop is also set to hit Honda and Car & General.
Both dealers opened assembly plants in Nairobi to gain a larger share of the motorcycle market that is dominated by brands from China and India.
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