AUTOMOTIVE

Tough times ahead as state plans to lock out used cars

The National Automotive Policy (2019) is in favor of local assembling and manufacturing

In Summary

• Ministries are required to give exclusive preference to local assemblers.

• Imports say locally assembled units are expensive by more than Sh600,000.

used: Imported cars at the port of Mombasa await clearance
used: Imported cars at the port of Mombasa await clearance

Majority of Kenyans could soon lack motor vehicles purchasing power as the government moves to implement a new policy favouring local manufacturing, with a mediu-term plan to ban importation of second hand cars.

The National Automotive Policy (2019) is currently at a stakeholder consultation stage, with the Trade and Industry Ministry expecting the policy to be adopted by September this year.

This is in line with the government's plan to encourage local manufacturing and assembling of units, with the automotive industry having a potential to significantly contribute to the manufacturing sector, and the government targets to increase its share to the GDP from the current 9.2 per cent to 15 per cent by 2022 as part of the Big Four Agenda.

“The policy is in its final stages, we are currently on version five which we are discussing with the original equipment manufacturers to establish their level of satisfaction with the incentives we are putting in place,”Industrialization Principal Secretary Betty Maina said at recent investment forum in Nairobi.

“It is our plan to have the policy adopted by September , so given the time required for Cabinet to review it, we have given ourselves the timeline to conclude it by the end of 2019,” Maina said.

The plan is to give a supportive environment for Research and Development in both automotive vehicles and components, including adaption of disruptive technologies.Plans are also in place to give tax incentives to local players.

Ministries, departments, agencies and other public entities are also,with effect from July 1 this year, required to give exclusive preference in procurement of motor vehicles and motor cycles from firms that have assembly plants in Kenya.

“This will go a long way in spurring the growth of local auxiliary industries and enterprises and create employment opportunities to the youth,” National Treasury's 2019/20 budget statement states.

The move has evoked mixed reactions where while a section of local investors have supported the move, importers of second hand cars have criticized the government for plans to make vehicles unaffordable.

According to the Car Importers Association of Kenya(CIAK) and the Kenya Auto Bazaar Association (KABA), locally assembled units are expensive by more than Sh600,000, which will take most units past the Sh2.5 million mark from the currenct prices where vehicles go for as as low as Sh680,000.

Car Importers Association of Kenya (CIAK) national chairman Peter Otieno yesterday said the policy which encourages importation of knocked down vehicles(whose parts are assembled in the country) will also encourage dumping of old parts.

“Majority of these parts are outdated and unwanted in the foreign markets. Kenya will become a dumping site,” Otieno said.

“Locally assembled cars will also be more expensive. This is going to lock out the poor Kenyan from affording a car which is not a luxury anymore but a necessity,” he added.

KABA chairman John Kipchumba has on several occasions accused the ministry of failing to involve industry players in policy formulation.

Kenya imports between 10,000 and 12,000 second hand cars a month mainly from Japan, retailing at an average Sh1.2 million. New cars retail at an average Sh3 million, which is above majority's spending power.

The country has an average assembling capacity of 5,000 units a year against an annual demand of 120,000 units.

The number of assembled motor vehicles increased by 15.9 per cent to 5,653 in 2018 compared to a 25.4 per cent drop in 2017, the Kenya Economic Survey 2019 indicates.