Vehicles assembly rises 18pc to hit new high on tax breaks

Data from the Kenya National Bureau of Statistics show that the assembled units rose from 11,555 the year before, with the growth seen as a response to tax incentives offered by the government to assemblers.

Motor vehicle parts headed to assembly parts are exempt from the 35 percent import duty on fully-built imports. They are also exempt from excise duty which is set at 20 percent, 25 percent and 35 percent depending on engine size and fuel type for internal combustion vehicles which continue to dominate the roads.

Assemblers further benefit from paying a lower Import Declaration Fee of 2.5 percent compared to the standard 3.5 percent.

Competitive pricing 

They also pay a lower Railway Development Levy (RDL) of 1.5 percent compared to the standard rate of two percent.

These tax incentives can lower the cost of vehicles by up to millions of shillings, giving assemblers the headroom to price their models more competitively or enjoy higher margins.

The showroom price of sport utility vehicles Toyota Fortuner and Isuzu mu-X, for instance, fell by about 3.2 million and 3.6 million respectively once they started being assembled locally.

Earlier this month, Isuzu East Africa announced it had cut the price of the mu-X to Sh9.9 million from the previous Sh13.5 million.

CFAO Mobility Kenya has dropped the price of the Toyota Fortuner from Sh13.2 million to Sh10 million after it started assembling the SUV in Mombasa in 2023.

Some used car dealers are selling eight-year-old Toyota Fortuner models from Sh6.5 million, indicating the growing competitiveness of assemblers.

“Despite the top-range new mu-X model with the latest safety, convenience and durability that it affords users, its price will drop by 27 percent, from Sh13.5 million to Sh9.9 million,” Isuzu’s chief executive Rita Kavashe said recently.

“This means that a brand new zero- mileage SUV will be as cheap as an eight-year old second hand Isuzu mu-X.”

Motor vehicle assembly has grown to surpass the total sales of new vehicle dealers under the Kenya Motor Industry Association (KMI) –who also sell fully-built imports— to indicate expansion by major assemblers as well as a rapid rise in new entrants.

Data from KMI shows that the new vehicle dealers sold 13,583 units last year, trailing the 13,692 models assembled in the period.

The dealers’ sales stood at 11,352 in 2024, again trailing the 11,555 assembled in that year.

Besides established players like Isuzu and CFAO which have expanded their assembly operations, there has also been a rapid growth in new players, particularly assemblers of Chinese models. The government is betting on the motor vehicle assembly sector to help create more jobs. 

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