Businesses & Financial News

Kenya’s car production on the mend as Gov’t approves 30 dealers

By Steve Umidha

The demand for locally-assembled vehicles is expected to rise on improved incentives by the government.

In his Thursday budget speech, Treasury Cabinet Secretary Ukur Yatani said the government will sustain its offer on various tax incentives to support local assembly of motor vehicles and motor cycles following the approval of 30 motor vehicle and motor cycles dealers in the last five years.

“I am pleased to note that the industry has responded positively to these interventions and to date, we have approved thirteen motor vehicles and seventeen motorcycle assemblers,” said Yatani.

The Ministry of Industrialization in collaboration with the National Treasury and the Kenya Revenue Authority has in recent years has attempted to woo investments into the industry through the removal of excise duty on locally assembled motor vehicles, duty-free importation of completely knocked down kits and a reduction of corporate tax from 30 to 15 percent for the first five years of operation.

As a result such moves have seen companies operating vehicle assembly plants in Kenya increase production by nearly a third following growing demand for locally assembled vehicles.

There has also been an increase in the number of firms with vehicle assembly lines and rising production capacity as various brands look to take advantage of incentives by the government.

Vehicle car dealers produced a combined 6,307 units between January and October 2019, 30 per cent more than the 4,820 produced over a similar period in 2018, according to data by the Kenya National Bureau of Statistics – signaling a steady rise since such calls were made.

“These local assemblers have created employment opportunities while also saving the country substantial foreign exchange,” noted Yatani in his speech.

While the assembly of commercial vehicles has registered an impressive growth, the passenger category of motor vehicles has remained underdeveloped in the last two years.

This category is still dominated by imported used vehicles comprising over 70 percent of passenger vehicles, which is largely attributed to the high cost of assembly.

As a result the Treasury CS says that the Government is working on a framework to support the assembly of affordable passenger vehicles with stakeholder consultations believed to be in its final stages for the adoption of a comprehensive policy and administrative reforms to fully entrench local assembly of motor vehicles and motorcycles.

Kenya is developing a Draft National Automotive Policy in consultation with Kenya vehicle manufacturers and auto vehicle companies whose outcome is expected to be ready and will pave the way for the ban on importation of second-hand vehicles.

The new piece of legislation is also meant to shield local vehicle manufacturers from what new vehicle dealers believe is unfair market competition brought by importers of second-hand vehicles.

Further, the policy will seek to lower the age limit of car imports coming into the country from 8 to 5 years while at the same time guaranteeing tariff-free to some vehicle parts being produced in the country.

The move will now make it difficult for buyers of such vehicles, popular on Kenyan roads, to pay more for such purchases owing to high duty fees and associated costs of buying cars manufactured in recent years.

The government, further targets to reduce the level of motor parts importation in order to make it possible for local companies to buy from local manufacturers of vehicle parts as well as invent reduced tariffs for local car assemblers, lower high costs of additional taxes, charges, levies as well as logistical charges to grow the industry and make it competitive.

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