Kenyans are now set to vroom their way around with prices of new cars expected to fall months after President Uhuru Kenyatta issued an order.
A report by the Kenya Motor Industry Association (KMI) on Tuesday, May 17, estimated that the prices will drop following a government directive, exempting locally assembled cars from Value Added Tax (VAT) as well as excise duty.
Since the directive was effected, the sales of locally assembled cars jumped from 2,867 between January and March 2021 to 3,203 in the same period in 2022 representing an 11.7 per cent increase.
Some of the companies that took advantage of the announcement include Isuzu East Africa, Toyota Kenya and Simba Corporation among others.President Uhuru Kenyatta commissions a local assembly of Proton Saga saloon cars on Thursday, December 10, 2019.PSCU
In the budget estimates presented by Treasury Cabinet Secretary Ukur Yattani, the state explained that the waiver was aimed at encouraging local investments in the sector.
Experts now estimate that a combination of all those factors, the ripple effect will lead to the reduction of new car prices.
In the assembly chain, the providers of raw materials such as steel, paint and upholstery will also benefit from the exemption of VAT.
"This is a very positive thing as it will make cars cheaper for ordinary people," stated Simba Corporations boss Adil Popat.
The sales of locally assembled vehicles was also boosted by another directive from President Uhuru Kenyatta in 2021 which requires all government ministries to purchase locally assembled cars.
In the first half of 2021, the production of locally assembled vehicles had risen by 80 per cent.
Fully assembled imported cars prices have, however, shot up as the tax exemption mechanisms are not extended to them.
For instance, as of February 2022, the price of importing a second-hand Vitz in Kenya had crossed the Ksh1 million mark from Ksh600,000 recorded mid-2021.
Several other high-range cars also recorded a sharp increase in their prices including Toyota Harrier, Toyota Fielder, Toyota Rav 4 and Toyota Premio.
The price increase for the cars gravitated between Ksh400,000 and Ksh791,000.An undated file image of cars at a yard in Nairobi, Kenya.
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