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Economy

Munya softens stance on 8-year ban with exemption for small cars

Trade secretary Peter Munya
Trade secretary Peter Munya. FILE PHOTO | NMG 

Cars with engine capacities of 1.5 litres and below will be spared from the plan to reduce the age limit of vehicle imports from eight to five years starting July.

The change signals that the government has softened its stance on the proposed rule, which has generated heated debate among players in motor vehicle sales.

Mr Peter Munya, the Industry and Trade Cabinet Secretary, Thursday said the change in the proposed policy will ensure that the middle class is not priced out of the car market.

In the long-term, the age limit and emissions control are intended to boost the nascent Kenyan vehicle assembly industry by encouraging purchase of locally-made cars.

“You (will) continue to import vehicles that are eight years old if they are 1,500 cc. That will not change, for now,” Mr Munya said in an interview with Citizen TV.

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However, he said those who want to import vehicles with higher-capacity engines "will be able to absorb the impact of higher prices and taxes" on the five-year models.

They will also have the choice of buying smaller cars if they become price-sensitive.

Among the models that will benefit from maintaining the status quo are Mazda Demio, Subaru Impreza, Toyota Vitz, Nissan Note and Toyota Rush.

Automotive policy

The age restriction on imports of vehicles with engine capacities above 1.5 litres will continue to tighten in the coming years, with plans to cap it at three years by 2021, according to the Draft National Automotive Policy.

“Implement a phase-out plan to reduce the importation of used vehicles in the Kenyan market while facilitating the local manufacturers to bring to the market affordable vehicles for diverse domestic market segments that can replace the shortfall emanating from the reduction in used vehicle importation,” the policy reads in part. “This will help in expanding the market for locally assembled vehicles.”

The age restrictions will result in a steep increase in prices and taxes payable on the targeted vehicles, with the cost increase ranging from hundreds of thousands to millions of shillings depending on the model.

A vehicle manufactured in 2012 is the oldest that can be imported into the country this year based on the current eight-year age limit but the change to five years means the year of manufacture will be 2015 onwards.

Newer vehicles cost more to buy from overseas markets such as Japan, with the units also attracting higher taxes since the custom value forms the basis for a series of cumulative levies.
For instance, a 4.6-litre petrol Toyota Land Cruiser VX manufactured in 2012 is currently retailing at Sh7 million while a similar 2015 model will be priced at about Sh11 million, inclusive of dealers' margins.

Similarly, a non-hybrid, 2.4-litre petrol Toyota Harrier made in 2012 is being sold for Sh2.8 million while a similar 2015 unit is expected to retail at Sh4.3 million.

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