Why Car Prices in Kenya Are Expected to Drop

The prices of cars in Kenya could drop in coming months, after the Kenya Revenue Authority (KRA) approved changes that will see importers and second-hard car dealers allowed to store imported units for up to a year without paying taxes.

Currently, importers have 30 days to pay all taxes, sometimes at nearly 55 percent of import cost, and remove their units from container freight stations (CFS).

As part of the government’s plan to make the country more conducive to trade, the KRA will begin licensing bonded warehouses. Operated by private firms, the warehouses will be licensed annually. It is at these bonded warehouses where goods including cars whose taxes have been deferred are kept.

Importers will be able to keep cars at bonded warehouses for up to six months without payment of taxes as they search for buyers, and will be able to seek for an additional six-month extension.

Individuals shipping vehicles to Kenya for their own use or for resale will also be able to enjoy the benefits. According to analysts, the change could encourage car dealers to ship higher volumes, helping drive down prices.

The KRA shift is among resolutions of an April 14 multi-agency meeting on ease of doing business, co-chaired by Trade Cabinet Secretary Trade Moses Kuria and his Transport counterpart, Kipchumba Murkomen in Mombasa.

The meeting “agreed to streamline and introduce bonded warehouses for imported used vehicle inspection”.

Kenya Auto Bazaar Association Secretary General Charles Munyori told Business Daily that the change would improve importers’ cash flows, stating: “It means importers can leave the vehicles in the bonded warehouses and not pay taxes until they get buyers. This will boost cash flows for importers.”

“It also has the potential to lower prices of vehicles by encouraging large volumes of imports by big players, which will reduce the need for everyone to buy from abroad and incur foreign exchange charges,” he further noted.

Car prices in Kenya have risen significantly over the past year, with enforcement of the eight-year age limit on imported vehicles driving prices of used cars up by as much as 50% for some models.

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