Market Trends of Kenya Used Car Industry
Governmental Importation Taxes on Used Cars is Likely to Boost Local Automobile Market-
- The imposition of higher importation taxes on used cars by the Kenyan government is expected to provide a notable boost to the local used and newly manufactured cars market. This policy change is likely to encourage consumers to consider purchasing locally manufactured cars, as they would now represent a more cost-effective alternative compared to the pricier imported used cars. Consequently, this shift in consumer behaviors is poised to stimulate demand for domestic automotive products and promote the growth of the locally modified cars industry. For instance,
- In July 2023, Kenyan car consumers are facing a substantial 35% increase in import duties as part of the recent East African Community (EAC) agreement. The adjustment, sanctioned by the EAC Council of Ministers, is poised to lead to significant price hikes for imported cars, reaching double-digit percentages. Moreover, to assist the domestically used auto sector, the Kenyan government has recently made efforts to regulate the importation of pre-owned cars. For instance, limiting the importing age for automobiles to 8 years.
- The goal is to keep lowering the restriction with a strategy to switch to a 5-year limit, which would be cars from 2018 to the present, then a 3-year limit, or cars from 2020 to 2023, and lastly to brand-new or zero-mileage cars.
- With the government's support for the local auto industry through reduced value-added taxes and excise taxes, Kenyan automotive players have invested in advanced technology and modern manufacturing processes, resulting in vehicles that are increasingly comparable in quality to their foreign counterparts.
- As a result, it is expected to see an increase in the competitiveness of locally produced used cars. Owing to such factors, the demand for used cars will remain in a growth trajectory over the coming years and will have a subsequent positive impact on the used car market.
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Several Players Investing in the Market is Likely to Strengthen the Demand Trajectory for Used Car Market in the Kenya-
- Since used cars account for all vehicles sold in Kenya, the population of Kenya prefers to purchase used cars. The Kenyan auto industry relies heavily on Japanese vehicles. Kenya imports a significant number of used cars from Japan. Consumers in the country have been strongly drawn to these used cars due to an uptick in their purchasing power and a rise in their average disposable income in recent times.
- However, the organized sector of the used car market remains somewhat fragmented, primarily because there are only a handful of retailers and distributors who deal in cars from all segments at a larger scale. Many players in the market employ diverse business strategies, with some actively investing in expanding their sales channels and often utilizing various approaches to harness the potential of this burgeoning industry.
- For instance, in June 2023, Peach Cars, a Kenyan Used car marketplace, announced that it had raised USD 5 million in a seed funding round led by Japan-based University of Tokyo Edge Capital Partners (UTEC). Peach Cars aims to address the challenges faced by buyers and sellers in the used car market by providing a transparent, efficient, and trustworthy online platform. With a focus on enhancing the customer experience and streamlining the car purchasing process, the startup intends to disrupt the industry and create a new standard of excellence in the Kenyan automotive market.
- In Kenya, 80% of passenger car imports come from Japan, with the United Kingdom and South Africa following closely behind at 8% and 4%, respectively. With up to 50% of the market share, Toyota dominates the used cars industry in Kenya. With a 12% market share, it is in third place after Isuzu (40%) and Mitsubishi (25%) in the commercial vehicle industry. Japan holds a 50% market share for commercial vehicles, followed by South Africa (16%), China (10%), and India (7%).
- Additionally, increased investment often leads to higher marketing and promotional activities, raising awareness about the benefits of buying used cars. As a result, the cumulative effect of these investments is likely to create positive momentum, attracting more buyers and ultimately strengthening the demand for used cars in Kenya.
