Why Prices of Locally Assembled Vehicles Are Set to Drop

  • Personal Cars on a haulier truck
    Personal Cars on a hauler truck.
    File
  • Kenyans are set to enjoy cheaper prices for locally assembled vehicles following the signing into law of the Finance Bill 2022 by President Uhuru Kenyatta.

    The details of the Finance Act exempt firms involved in assembling cars locally from punitive taxes applicable to units imported into from Europe, South Africa, and Japan among other markets.

    President Uhuru adopted the proposals by the National Treasury and the National Assembly that are geared towards deepening the concession for local vehicle assemblers who qualify for the tax incentive.

    Cars at a yard awaiting auction.
    Cars at a yard awaiting auction.
    File

    Before Uhuru assented the Finance Bill 2022 into law, the automobile assemblers were required to source at least 30 per cent of spare parts locally to qualify for government incentives.

    The Finance and Planning Committee of the National Assembly in its proposal, removed the clause which required assemblers to acquire 30 per cent of their spare parts locally.

    "That, Clause 35 of the Bill be amended and substitute therefore the words and whose ex-factory value comprises at least thirty per cent of local content and inserting the words where local content means parts designed and manufactured in Kenya by an original equipment manufacturer operating in Kenya," the Bill read in part.

    The major vehicle assemblers in the country at the moment include General Motors located in Nairobi, Mombasa Associated Vehicle Assemblers, and Kenya Vehicle Manufacturers based in Thika.

    Following the adoption of the Finance Bill 2022, Kenyans purchasing new vehicles that are locally assembled are set to pay less owing to the tax incentives by the government.

    The move is aimed at encouraging Kenyans to purchase locally assembled units and promote local manufacturing.

    According to data from Kenya Vehicle Manufacturers, sales of locally assembled units crossed the 10,000 mark in 2021 compared to 126,415 units imported the same year.

    The data further aligns with a recent research which showed that Kenyans are now shunning popular car brands due to their hiked prices.

    "We are seeing a shift where Kenyans are now moving from the popular brands to other models. This shift has been occasioned by the high cost that these cars are now fetching at the market," Charles Munyori, the Secretary General of Kenya Auto Bazaar Association, stated.

    The increase in prices among popular brands has been attributed to the shortage of electronic chips in Japan, the unavailability of dollars locally and a weakening shilling.

    The dollar shortage has also affected motor vehicle importers who are also braving the brute of the unfavourable exchange rates.

    File photo of used cars in a yard
    File photo of used cars in a yard
    File