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Used car prices jump up to 33pc in months

Imported cars at a yard in Changamwe, Mombasa.
Used car prices in Kenya have risen by up to 33 percent over the past six months as demand outstrips supply globally on production cuts.
Popular 2014 Japanese models such as Toyota Harrier, Toyota Fielder, Toyota Rav 4, Toyota Premio and Nissan X-Trail have seen their yard prices increase by a range of between Sh200,000 and Sh600,000 since April.
Car 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 that are used in electronic devices.
Most of those buyers in the developed markets would typically buy new cars but have now resorted to purchasing second-hand models in response to shortages and escalating sticker prices of new vehicles.
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 imported used models.
“The prices of some cars have shot up by almost Sh500,000,” said Charles Munyori, the secretary-general of Kenya Auto Bazaar Association, which represents used car dealers.
“Most people, for instance, are not importing Rav-4 because they are very pricey to import now and hence stay at the yard longer. So this has created a shortage that has pushed the price from Sh2.3 million in April to Sh2.8 million.”
Car importers say purchase prices in Japan, the major source of used vehicles, increased by $4,000 (Sh446,400) on average.
The price shock has mainly affected vehicles registered in 2014, 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.
Prices of X-Trail and Harrier have both risen the most by Sh600,000 each to Sh2.4 million and Sh3.4 million respectively, representing a jump of 33.3 percent and 21.4 percent.
A Vanguard is going for Sh2.8 million, up from Sh2.5 million while the price of a Premio has increased to Sh1.9 million from Sh1.6 million.
Mr Munyori said the shortages are expected to extend to next year, signalling even higher prices which may put the cars out of reach of many Kenyans.
The supply and demand imbalance is also expected to get worse before it gets better. Only a resolution of the chip crisis and the return to normal production levels will stem the tide.
In the West and Asia, demand for vehicles has surged since late last year, as consumers with money saved by working from home and cancelling foreign holidays splash out.
“We see things getting worse going into next year. Cars that will be imported in January and March will be too pricey,” Mr Munyori said.
Analysts reckon that the appreciation in car prices 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 Sh111.3 units against the dollar, making imports costly as car dealers need more local currency to buy foreign exchange to place orders for vehicles quoted in US dollars and other hard currency.
The semiconductor crisis also continues and could take car prices to astronomical heights if it is not resolved in the near term.
GM, Toyota and Renault are among the global automakers that have scaled-down production, with forecasts indicating that the crisis could persist up to 2023.
Semiconductors are used to control electrical current, making them essential in battery management and in-car entertainment, among other systems. They are found in devices such as sensors and microcomputers.
Their shortage has been caused by various factors, including a faster-than-expected recovery in demand for vehicles and competition from other industries such as telecommunications.
The average cost of semiconductors per car is estimated at more than Sh50,000 and the figure is projected to rise in the short term.
Car shortages first hit the developed markets and have seen buyers pay more for the same models compared to last year. – businessdailyafrica.com