Kenyans cut spending on imported vehicles by Sh31.7 billion last year, marking the first drop in four years.
Official data shows that the value of vehicles shipped into the country dropped to Sh85.8 billion, down from Sh117.6 billion in 2015 — reflecting a 27 per cent drop.
Motor dealers attributed the cutback to reduced demand for vehicles due to tax measures introduced in December 2015 that made cars below Sh1 million more expensive. The majority of Kenyans import used cars of below Sh1 million.
The number of newly registered vehicles dropped 16 per cent to 90,176 in 2016 from 107,761 a year earlier, the Economic Survey 2017 shows.
“The drop in new registration of motor vehicles may be attributed to higher import taxes imposed on used cars in 2015/16,” the survey says.
The price of popular models such as Toyota Belta shot to nearly Sh1 million with the December taxes, according to Kenya Auto Bazaar Association — a lobby group for second hand car dealers.
The Treasury, however, last June abandoned the flat rate duty of Sh200,000 for vehicles older than three years and Sh150,000 for newer ones introduced in December, in favour of the previous 20 per cent levy of the car’s value.
But the damage had already been done.
It also came in a period characterised by the weakening of the Kenyan shilling against the US dollar that made imports expensive. The shilling weakened to a low of Sh106 units to the dollar last September before gaining ground to the current Sh103.
The introduction of the flat rate in December was faulted after it effectively raised the prices of small vehicles popular with the middle and lower income classes while reducing the cost of fuel-guzzlers.
Kenya’s car market is dominated by low-priced second-hand imports from