Used car prices in Kenya have jumped by an average 37 percent over the past six months as demand outstrips supply globally on production cuts, pushing low range vehicles like Nissan Note and Vitz above the one million shilling mark.
Popular 2015 Japanese models such as Toyota Harrier, Toyota Fielder, Toyota Rav 4, Toyota Premio and Nissan X-Trail have seen their import prices, which excludes dealers’ margin, increase by a range of between Sh408,000 and Sh791,000 since August, according to data from Kenya Auto Bazaar Association, which represents used car dealers.
Dealers are now 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 purchasing second-hand models in response to shortages.
Economic uncertainty brought by the Covid-19 pandemic has also seen consumers in the developed world keep their cars for longer than usual, further reducing supplies to Kenya, which relies on imports.
“Prices have gone haywire since the start of quarter four last year and are unlikely to come down and will defy the January-March cycle,” said Charles Munyori, the secretary-general of Kenya Auto Bazaar Association.
Traditionally, car prices gradually fall from April to December. But dealers reckon this trend is unlikely to play 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.
Sh1m Vitz
That has meant more buyers turning to used cars with demand pressures pushing up second-hand vehicle prices at unprecedented rates.
The landed price of low-range cars such as Vitz increased 44 percent to Sh1.07 million while the cost of Nissan Note is up 39 percent to Sh938, 000.
This has pushed their cost at the yard above the Sh1 million mark given dealers add a margin of about 10 percent on the landed price.
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.
The landed prices of X-Trail and Rav 4 have both risen the most by above Sh750,000 each to Sh2.84 million and Sh2.22million respectively, representing a jump of 52 percent and 32 percent.
Toyota Harrier is going for Sh3.64 million, up from Sh2.22million while the price of a Premio has increased to Sh1.2 million from Sh1.6 million.
This means Harrier is close to breaching the Sh4 million mark in the yards while Premio is on course to cross the Sh2 million mark.
A Toyota Prado is coming into the country at Sh4.7 million up from Sh3.6 million, representing a 31 percent jump in the review period.
The shilling factor
Analysts say the appreciation upsets the traditional trend where vehicles prices fall once they leave dealerships.
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 has hit the lowest level this year at Sh113.80 units against the dollar compared to Sh109.70 in August, 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.
“The cost of the dollar locally is also a factor. Last year the dollar was retailing between Sh105 and Sh110. Currently, it is at Sh115 and above, depending on the source,” said Mr Munyori.
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