Auto dealers predict slow growth at start of the year

Statistics

-A total of 19,966 vehicles were sold last year, a growth rate of 15 percent

-The government is betting on the new taxes to raise additional Sh25billion to help finance its national budget

– Under the new law Used five-year-old vehicle worth Sh750, 000 will be charged a Sh200,000 levy as opposed to Sh150,000 based on the previous calculation of 20 per cent its value, while duty on popular vehicles like Toyota Premio(1490cc) and Vitz will attract levies of Sh124,000 and Sh345,842 respectively

 

 

Automakers in the country are bracing for a year of single-digit growth, weighed down by the roll-out of a new tax regime and high lending rates – painting a gloomy outlook in the auto industry that grew by15 percent last year.

 

Under the new taxation arrangement, imported used cars or mitumba vehicles will be charged import duty, excise duty and value added tax payable cumulatively in that order with the import duty charged at 25 percent, VAT at 16 percent while excise duty will be based on the age of the car – which has been capped at eight years in the new excise duty law.

 

Executives of domestic and foreign-based car-makers now say the high taxation is largely prohibitive to the sector’s growth since all vehicles under the Act has not spared locally assembled cars whose prices are bound to rise.

 

“Ultimately local vehicle assemblers will begin to feel the pressure from the new tax system, coupled with high interest rates especially in our EAC markets where the situation is even dire where we have witnessed a dip in our revenues,” said General Motors East Africa managing director Rita Kavashe – who projects the industry will grow at a flat-rate figure.

 

Ms Kavashe said yesterday in an exclusive interview with this writer that the new regime goes against the spirit of industrialization given that its effects will see an increase in prices of locally assembled vehicles, revealing that the assembler in partnership with other stakeholders have begun conversation with the ministry of Industrialization and the National Treasury to seek clarification of the tax law with the outcomes of the talks expected to ease tension and panic in the industry.

 

Dinesh Kotecha, the executive director of Simba Colt Motors in a separate interview however expressed a positive growth in the sector this year but is skeptical about 2017 – the electioneering year he says will affect vehicle sales.

 

“We were very positive and expected the industry to grow before the excise duty; we however still expect the industry to grow but its enactment into law means the prices of cars is going to be much more expensive and the recent we believe is going to affect the local SME-class making new cars more expensive,” he said, adding that despite the excise duty, the growth will be realized in the industry even though it will be moderate.

 

Mr. Dinesh says the ongoing infrastructural projects across the country will likely carry the momentum.

 

Industry players also predict the two factors among others may hamper the industry’s growth which may see a slow growth in unit sales.

 

The market grew by 15 percent with total unit sales of 19, 966 vehicles sold last year.
GMEA which accounts for the largest share in trucks and pick-ups business grew by 33 percent, Japanese car maker Toyota Kenya led in saloon car segment while Simba Colt Motors registered a growth of 15.4 percent and targets to grow by 10 percent this year.