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…despite revocation of excise duty on local assemblers
Total vehicle sales to September, 2016 fell short of analysts’ estimates, driving units sold down the most in nine months, after the industry warned that the prohibitive tax regime, high interest rates and contracted activities in the construction sector would upset full-year sales target.
Vehicle sales registered steepest fall by 48.6 per cent with the looming general elections further expected to knock car sales for most part of 2017 – the electioneering year.
Total vehicle sales across all categories declined to 10, 368 units between January and September, compared to 15,407 units sold over a similar period last year.
“We anticipated the industry to perform in this manner right when excise duty was introduced,” Kenya Motor Industry Association Chair Rita Kavashe said in a previous interview.
After a record steak of annual industry’s 19,966 auto sales last year, analysts are now skeptical that the record set in 2015 will not be topped this year or even the year after – this despite removal of excise duty charge on local assemblers in September, according to Ms. Kavashe, also managing director at GMEA.
Last year’s 15 percent growth was highest the industry has witnessed which was more than the 17,499 units sold in 2014 and 14,542 units the year before.
Data by Kenya Motor Industry (KMI) further shows that the number of locally assembled vehicles dropped by 35.2 per cent in the first three months (Jan-Feb-March) while motor assemblers had at the start of the year cut their output to 1,600 units in the year to March, down from 2,472 in a similar period 2015 and 2,040 units a year earlier – signaling a consistent decline since the year began for car makers.
Consumer demand has gone slack, forcing automakers to dial up deals to lure buyers to showrooms.
The auto market slowed sooner than it was expected, according to motor analyst Stephen Mbuthi who said “the market will start levelling after the 2017 general elections.”
The government had in September reversed its earlier decision to levy excise tax duty on locally-assembled vehicles after President Uhuru Kenyatta signed the Finance Bill, 2016 with amendments to scrap excise tax at a rate of 20 per cent on locally-assembled vehicles.
“The revocation of excise tax duty and reduced interest rates will make it possible for people to afford new cars and boost the industrialization agenda that we have been discussing with policy makers,” said Kavashe.
The new tax regime was first introduced on motor assemblers at a flat rate of Sh150, 000 per vehicle in 2015 before it was increased to 20 per cent of a vehicle’s value in June—a condition believed to have affected the industry for most part of the year leading to sluggish growth.