Japan’s quake adds pricing pressure on used car imports

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Second hand car dealers who source their vehicles from Japan are warning that the ongoing crisis in the Asian country will hit their business, with possibilities of price increases owing to reduced supplies.

Kenya is currently the largest importer of used vehicles from Japan, ranking above other African countries.

The impending price increase worries are compounded further by the value of the shilling which has been on a freefall in recent weeks tipping the scales against potential importers.

“Owing to the law of supply and demand, we are poised to see an increase in pricing of the 2004 and above models since their reduced and delayed shipments will negatively impact the country’s stocks. Several major shipping companies have already announced rescheduled departures”, the Secretary General of the Kenya Auto Bazaar Association (KABA) Mr Charles Munyori said.

Lobby group

KABA is a lobby group for second hand motor dealers.

According to Mr Munyori, the low-value currency will make a bad situation dire since taxation rates are pegged on current retail selling price (CRSP) of the vehicle which, with the shilling trading at an all-time low of around 85 to the dollar on Tuesday, will remain high.

In December last year, Kenya Revenue Authority (KRA) released a revised CRSP list to be used in conjunction with a valuation template in calculating the total cost of taxes payable by importers while factoring in depreciation.

Frank Okemwa Business Development Manager at Kenya Car Bazaar says that Kenyan buyers are looking at a cocktail of forces working against them to literally drive the price of cars up in two weeks.

“The effects of the revised KRA taxation schedules effects have not been fully felt in the industry, a situation now poised to change with the tsunami disaster and its effects on various industries projected to be felt in the Kenyan market even within the month”, he said.

“Another scenario expected to influence pricing is unscrupulous dealers in the country rasing prices even where their imports came in early .”

With Japan more or less fully engrossed in recovery and mitigation of further damages, A-Plus Motors Limited importation manager Mr John Karanja says that the efficiency of transactions with suppliers has gone down immensely leading to a slowdown in business.

“I make orders through email or video conferencing but with the situation as it is, I am yet to get feedback enquiring about the progress and safety of shipments we ordered but the emails have gone without reply”, the manager said.

Mr Karanja said future projections are not good since ,as is the norm in business, the Japanese will want to recoup on losses made once the situation calms down and complete loss assessments are made;—a move that may see them raise their car prices.

Importers of ready made vehicles are also preparing for a dip in supplies owing to some major factories closing down.

General Motors East Africa Managing Director Mr William Lay however says that this scenario will be short-lived and the import market is expected to bounce back.

He said they expected a disruption in the supply chain from Japanese suppliers like Isuzu whose factories will remain closed this week but he anticipates that regular operations will resume by end of the March.

International media also report that Toyota has ordered a halt in all automobile productions until Wednesday this week.

 

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