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New car owners turn to used spares as prices surge 50pc

spare

A spare parts shop in Kisumu. PHOTO | TONNY OMONDI | NMG

Sparepart prices in Kenya have jumped by up to 50 percent in the last six months on rising shipping costs and a weakening shilling, with second-hand parts being the worst hit.

The price surge has forced some buyers who would typically buy new car parts to also go for second-hand varieties that fit within their budgets.

Data gathered by the Business Daily from motor vehicle spare parts dealers in Nairobi show that a nose cut for a Toyota Fielder, 2008 model has increased by 50 percent to Sh85,000 whereas the price of headlights for 2005 Japanese models such as Toyota Premio rose from Sh20,000 to Sh30,000 in the last six months.

Headlights of a Toyota Corolla have increased from Sh18,000 to Sh24,000 on average in the last six months.

Headlights are some of the top-selling parts in cars given their exposure to accidents and theft. The thriving boda boda industry has also come with a spike in small accidents involving motorists, which are not covered by insurance.

A boot for a second fielder 2010 model is retailing in Nairobi at Sh18,000 from Sh12,000 in January while a 2005 Toyota Premio front bumper is now selling for Sh45,000, a 28 percent rise in the period under review.

Next regime

These prices could be higher or lower depending on the dealers and their location in Nairobi.

Car Importers Association of Kenya chairman Peter Otieno says the prices of secondhand vehicle spare parts are unlikely to drop in the coming months so long as the shilling will continue to lose value against the dollar.

“Since second-hand vehicle parts also are imported in dollars, when the shilling takes a beating against the dollar expect prices to remain unchanged in the next couple of months,” said Mr Otieno.

“The government should come in and allow us to use the old taxes we were using before as we wait to usher in the next regime which must also come up with favourable taxes.”

The main car components sourced locally include batteries, tyres, seat covers, and windows but they are not of high value.

The most expensive car parts such as engines and transmission are imported from overseas markets such as Japan, Malaysia, Dubai and China.

The increase in used car part prices has seen dealers cut the orders they make from source markets such as Dubai in a month by 30 percent on expensive shipping fees to manage cash flows.

Compounding the problem of used car parts shortages is the weakening of the Kenya shilling and bottlenecks in global supply chains that have in turn inflated container and shipping costs.

The shilling closed trading at Sh118.70 units against the dollar on Wednesday compared to Sh113.58 in February and Sh107.85 a year ago, making imports costlier as used car parts dealers need more local currency to buy foreign exchange to place orders for spares quoted in foreign currency.

Strong dollar demand from various sectors outstripped thin inflows, traders said.

The government has set a condition for assemblers to source parts in the local market worth at least 30 percent of the value of passenger cars before they can be exempted from value-added tax (VAT), which is charged at a rate of 16 percent.

The VAT exemption is new and specific for assemblers of passenger cars and adds to the waiver of import duty (25 percent) and excise tax (20 percent) enjoyed by assemblers of all types of vehicles.

The condition put on the VAT waiver aims to push the firms including Simba Corp, which assembles Proton cars and DT Dobie (Volkswagen cars) to expand the list of components made locally to widen the value chain.

A rise in the cost of shipment of second-hand car parts means that dealers must push up their prices by substantial margins to recoup their investment.

The rise in prices of spare parts comes at a time when car prices are on an upward trajectory following global supply disruptions.

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