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Prices of used cars jump as shilling hits historic low

By John Mutua December 2nd, 2020 3 min read

The cost of second-hand cars has jumped by up to 12 per cent or Sh500,000 per unit over the past three months, propped up by the weakening of the shilling to historic lows against the dollar in the wake of coronavirus-related economic shocks.

The shilling on Tuesday traded at Sh110.15 units to the US dollar from Sh106.4 in June and Sh102.3 in March – prompting the importers of items like cars, fuel, second-hand clothes and industrial machinery to pass the additional costs to consumers.

Charles Munyori, the secretary-general of the used car dealers lobby Kenya Auto Bazaar Association, said the pinch of the weakening shilling was already being felt among buyers of car units shipped in last month.

The rise in car prices comes amid plunging purchase orders due to reduced cash flow from to the Covid-19 pandemic, which triggered layoffs and pay cuts as banks reduced credit lines in fear of defaults.

Kenyans faced with Covid-19-linked hardships have gone slow on luxury spending.

New vehicle registrations dipped 33 per cent to 52,999 in the nine months to September from 79,078 in similar period last year, data by the Kenya National Bureau of Statistics (KNBS) shows.

“When we were buying the dollar between 101 and 105, this did not have much of an impact but now it is 110 and the effects are huge. Some models like an eight-year-old Land Cruiser V8 will cost at least Sh480,000 more without taxes, so you add taxes to this and it goes above half a million shillings,” Mr Munyori said.

“For any model that goes for anything above $10,000, the rise will be steep and a car that goes for Sh1 million will now go up by at least Sh130,000.”

Mr Munyori said that new shipments of the 2013 Toyota Fielder cost Sh1.5 million per unit from Sh1.3 million while the price of Toyota Axio 2013 model is set at Sh1.25 million from Sh1.1 million.

A used Nissan X-Trail of an engine capacity of 2,000 cc whose average market price was Sh1.7 million is now retailing at Sh1.82 million in what is expected to further hit sales for dealers who have since April been grappling with depressed demand for the used cars.

Prices of used luxury brands like Mercedes Benz and the Land Cruiser V8 series have registered the biggest rise of between Sh300,000 and Sh400,000.

A used Mercedes Benz 2013 E350 model, for example, is selling at Sh3.7 million, up from Sh3.4 million while a C200 2014 model is retailing at Sh2.6 million from the previous Sh2.3 million.

The weakening of the shilling further dims prospects for the dealers who were from April forced to lower prices to match the reduced demand due to the Covid-19-induced layoffs, job cuts and business closures.

The shilling has been on a free fall since March 13 when Kenya reported its first Covid-19 case and has hit historic lows because of a lack of tourists and reduction of exports that have squeezed the supply of the dollar.

Analysts have linked the record weakening of the shilling to the increased dollar demand and a dimmed outlook for exports in the wake of renewed lockdowns in Europe following a second wave of Coronavirus infections.

Countries such as France, Austria, Germany, Portugal and Sweden have implemented a second round of lockdowns to battle fresh infections, which is set to hit the export of items such as flowers, fruits and vegetables.

Kenya is also grappling with sharp rises in Covid-19 infections and related deaths since easing travel restrictions and re-opening of bars and learning institutions in September.

The shilling has also been dragged down by demand for hard currencies from importers resuming business after the State started to ease Coronavirus containment measures in July, which has seen businesses increase activities.

Mr Munyori said that reduced production of cars in Japan due to closure of factories to curb spread of the coronavirus in March have added to the shilling’s woes.

He also pointed out that most car owners in Japan have become reluctant to offload their cars for markets like Kenya— a major importer of the used models.

Vehicles from Japan dominate the Kenyan second-hand car market, controlling more than 80 per cent of market share.

“Production in Japan has gone down due to Covid-19 and now people are holding onto their cars, and the second-hand cars mainly of eight years are becoming increasingly difficult to get,” Mr Munyori said.

“October to November is our high season but the vehicles have become expensive in Japan and the production has also fallen. Last year we did about 7,000 units but now this has fallen to 4,000 based on the last shipment done at start of November.”