Kenyans Should Brace for Higher-Priced Used Vehicle Imports

Imported vehicles at a yard in Mombasa | CREDIT // Business Daily Kenya
Imported vehicles at a yard in Mombasa | CREDIT // Business Daily Kenya

Of recently, my Eight years old son developed the love for cars. He started with identifying every Subaru on the road.

You’ll forgive him for being a millennial of bourgeoisie upbringing. However, there’s more to his new love for cars. He constantly works hard to identify any car on the road.

As recently as this weekend, he upped his game and proved that it is not just a coincidence when he asked me: “Baba do you know Lamborghini? ” of course I told him “yes baba I know it”, now that he got my attention, a big long-lasting smile on his face appeared.

Sometimes, inspirations finds you, a case at hand is the one I got from my son. So my indulgence into this topic.

If implemented, a proposal by the East African Community (EAC) may force middle-class Kenyans and citizens of the EAC to dig deeper into their coffers to import used vehicles.

In a raft of efforts to promote local vehicle assembly in the region, the report recommends for the reduction of the age limit for used vehicles into East Africa to five years by 2022.

South Sudan, Burundi and Rwanda are expected to feel the pinch the most since at present they do not have age limits set on such imports.

Tanzania and Kenya will be considerably affected as they currently only allow importation of used vehicles not older than 10 and eight years respectively.

The EAC report, prepared by Japan International Cooperation Agency (JICA) and the EAC Secretariat, argues that fragmented policies on age limits has led to stifled growth of local manufacturing plants and the flooding of the regional market with rickety old vehicles.

It is estimated that about 85 percent of the 2.2 million vehicles owned in the region are used imports. Owing to the high importation rate, the region loses about $2 billion per year.

“Lack of clear policy on age limits has been identified as a factor contributing to increased imports of used vehicles, while also posing adverse impact on environment, safety and health,” states a policy brief on the report that was submitted to a summit of the EAC heads of state last month (May 2017).

The report proposes a staggered and unified approach in the EAC to achieve the lowered age-limit of five years.

It is recommended that by 2019 individual countries of the community should have limited the age to 8 years (where Kenya is currently at) and ultimately achieving the five-year limit by 2021.

According to the report, the EAC will invest in two assembly plants that will manufacture vehicles with price ranging between $5,000 and $10,000; with a target of producing 500,000 vehicles annually by 2027.

In a community comprising countries that hold each other with great suspicion, simmering sibling rivalry and inability to agree on international trade agreements such as the Economic Partnership Agreement (EPA) with the European Union (EU), one cannot help but wonder how the two countries to host the manufacturing plants will be chosen.

Setting up manufacturing plants will have direct benefits to citizens of countries they are domiciled in, which range from: proceeds from land acquisition, setting up plants, job creation, import tax and VAT of raw materials.

Local businesses such as logistic service providers will stand to benefit from spill over effects.

In view of the foregoing, the roll out plans for setting up and rolling out such plants need to be solid ensuring the members of the communities benefit equally – location of the plants notwithstanding.

New vehicles are highly priced and out of reach for middle class citizens who will be affected by the lowering of the age limits.

If the EAC report is adopted and implemented, it will be laudable to see the region churning out brand new vehicles with prices ranging $5,000 to $10,000.

In the meanwhile, feel free to contact Sidoman for all your vehicle clearing and forwarding needs.

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Monday 10th Jul 2017

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