Data from the Kenya National Bureau of Statistics shows used cars make up about 80% of the vehicles on Kenyan roads. Further, about 99% of vehicles imported on an annual basis are used cars.
While over the past five years an upward trend has been noted in the car market, with more cars being imported year over year, the statistics pertaining to used cars have remained largely the same.
Looking deeper into this, it is noted that the cost of importing a vehicle, particularly in relation to the attendant taxes, being duty, excise and value added tax (VAT) is relatively high, with import duty standing at 25%, excise duty at 20% and VAT at 16%.
All factors considered, the attendant cost of importing a vehicle brings the total cost of the vehicle to almost double the Cost, Insurance and Freight (CIF) price. With this in mind, it is therefore no surprise that Kenya’s car market is dominated by low-priced second hand vehicles.
This large appetite for cheap used cars, however, comes at a cost. With the average age of vehicles on Kenyan roads being 15 years, maintenance is definitely an issue. Older cars require frequent, and sometimes costly repair. Further, low fuel efficiency due to expected wear and tear serves to increase the day to day cost faced by the Kenyan consumer. Perhaps even more critical, our environment is also threatened with older vehicles producing higher carbon emissions.
In a bid to reduce the number of unroadworthy cars, import rules are in place that state the criteria to be met in order to import a vehicle. The vehicle must pass a safety and mechanical inspection, must be right hand drive, and must be less than eight years old.
While it has been argued that the eight year limit is fair to the middle and lower class that may not afford newer cars, this is still a little too old. With this in mind, Kenya earlier last year proposed to reduce the age limit to 5 years across the EAC region.
Unfortunately, other EAC members rejected this idea, noting that Kenyans have higher purchasing power and therefore can import new vehicles, as opposed to our neighbours. In the Kenyan context, given the high tax rates imposed on imported vehicles, reducing the limit without reducing the tax would make the cost of vehicles unreachable to most Kenyans.
In the interest of ensuring that vehicles on our roads are road worthy and not pollution hogs, focus must be placed on ensuring that newer vehicles are accessible to the average Kenyan. To this effect, import taxes could be cut down, thus enabling vehicle age limits to be effectively lowered. Further, by introducing carbon emissions taxes on vehicles, older, smoke spewing vehicles will naturally be phased out.
