The prices of imported cars to Kenya, both new and old, are expected to increase by hundreds of thousands following the approval of an increase in import duty on imported cars to Kenya to 35% from 25% by the EAC Council of Ministers. This is in accordance with Kenya’s government request as it strives to achieve its goal of collecting more taxes to clock its target of Ksh 2.6 trillion in FY 2023/2024, which translates to a Ksh 211.0 billion increase from the previous fiscal year. The cost of importing cars to Kenya is expected to increase by approximately 14.0% due to the import duty increase.
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The increase in import duty is going to have a multiplier effect on all taxes charged on imported cars, like excise duty and Value Added Tax (VAT), since they are charged on the total amount of import duty and the real price of the car. This will make cars sold locally in Kenya more expensive compared to other neighbouring countries like Uganda.
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The sector has experienced back-to-back increases in import costs, resulting in increased car prices in the country due to the depreciating Kenyan Shilling against the dollar, where the Shilling has shed 13.98% from January 2023 to date. This results in increased prices for the importers, which are transferred to the car buyers.
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Further, the sector is affected by the increase in VAT on fuel products to 16.0% from 8.0%, which took effect on July 20, 2023. That saw fuel prices increase by Ksh 13.0, which will in turn increase the final cost of owning a car. This, coupled with the increase in import duty, is expected to dampen the demand for cars in the country as Kenyans opt for cheaper options like public transport.
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