Imported second-hand cars at the port of Mombasa on April 8, 2022. PHOTO | WACHIRA MWANGI | NMG
Used car prices in Kenya have jumped by up to 30 percent over the past three months on weak shilling, scarcity of vehicles and rising shipping costs, pushing low-range types such as Vitz above the KSh1.2 million mark.
Popular 2015 Japanese models such as Toyota Harrier, Toyota Fielder and Toyota Premio and Nissan Sylphy have gone up by between KSh150,000 and KSh400,000 since April, according to data from Kenya Auto Bazaar Association, which represents used car dealers.
Buyers are cutting orders and shunning popular Toyota car models in favour of Nissan and Mazda brands due to cost pain.
Dealers are facing increased competition from buyers in source markets such as Japan and the UK as automakers have scaled down production owing to shortages of semiconductors used in electronic devices.
Most buyers in the developed markets would typically buy new cars but have now resorted to second-hand models in response to shortages.
If that wasn’t enough, the weakening of the shilling against the dollar has put further strain on the cost of imported commodities as shipping lines increase ferrying expenses.
A used 2015 Mazda Demio is retailing at 30 percent more at KSh1.3 million from KSh1 million in March, with Toyota Vitz surging to KSh1.2 million, reflecting a 26.3 percent rise in the period under review. Charles Munyori, the secretary-general of the Kenya Auto Bazaar Association, warns that the prices are unlikely to drop or remain unchanged in the coming months.
“The weakened shilling has hit the sector and now a Vitz that previously you could get for a Sh1 million is now costing KSh250,000 more,” Mr Munyori said.
“Kenyans should not expect prices to come down anytime soon unless a miracle happens because we are in for a hard time.”
Traditionally, car prices gradually fall from April to December. But dealers reckon this trend has not played out this year.
“The market will stabilise once there is a sharp rise in new cars in Asia and western countries. This will take time,” said Mr Munyori.
A global shortage of computer chips used in car production, as well as other materials such as copper, aluminium and cobalt, has led to fewer new vehicles rolling off production lines.
That has meant more buyers turning to used cars with demand pressures pushing up second-hand vehicle prices at unprecedented rates.
The price shock has hit individuals and companies who buy vehicles using bank loans that cover vehicles that are less than eight years old and recover the debt within four years.
Mainly affected are vehicles registered in 2015, which are those within the eight years allowed as imports into the country. Vehicles from Japan dominate the Kenyan second-hand car market with a market share of more than 80 percent.
A 2015 Honda Fit is now retailing at KSh1.3 million from KSh1.15 million in March while the cost of Nissan Sylphy has increased to KSh1.4 million from KSh1.25 million.
Mazda Demio, Honda Fit and Vitz are popular with ride-hailing apps like Uber and Bolt and the surge in prices looks set to hurt a majority of youth who purchase the units to join the transport sector.
The cost of a used Mercedes Benz C-200 2015 model has jumped by KSh0.5 million to KSh2.7 million in the same period while the cost of a Toyota Premio has increased to KSh2.2 million from KSh1.6 million.
A 2015 Land Cruiser ZX (petrol engine) is now retailing at KSh9.5 million from KSh8 million in March, slowing sales of the high-end car that dealers expected to pick up during the campaign season as Kenyans head to the August 9 General Elections.
Compounding the problem of car shortages is the weakening of the Kenyan shilling and bottlenecks in global supply chains that have in turn inflated container and shipping costs.
The shilling closed trading at KSh117.90 units against the dollar on Friday compared to KSh114.95 in April and KSh107.85 a year ago, making imports costlier as car dealers need more local currency to buy foreign exchange to place orders for vehicles quoted in foreign currency.
Strong dollar demand from various sectors outstripped thin inflows, traders said.
Antony Aleri of CarMax East Africa— a leading dealer of used units in the city— reckons that the rise in shipping costs has worsened the market.
“Shipping is taking longer and is costlier due to the fact that the majority of the shipping lines give priority to the brand new vehicles for which premium price is paid,” said Mr Aleri.
Car orders made in March were yet to arrive in the country as at last week, dealers say, highlighting the impact of the high shipping costs and supply disruptions.
The value of car imports dropped in the three months ended March compared to similar a period last year, a sign that few vehicles were shipped in given the higher unit cost.
Official data show Kenya imported cars worth KSh18.53 billion in the three months to March, compared to KSh23.16 billion in a similar period a year earlier.
-Business Daily
