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Economy

Used car prices jump up to 29pc on scarcity

Tuesday April 27 2021

yard

Imported cars at a yard in Changamwe, Mombasa. PHOTO | KEVIN ODIT | NMG

john-mutua-img By JOHN MUTUA
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Summary

  • A global surge in demand for certain goods during the pandemic has upended normal trade flows, causing bottlenecks and leaving empty cargo containers stranded.
  • Mazda Demio, Toyota Fielder, Toyota Rav 4, Toyota Vanguard and Nissan X-Trail are some of the popular models whose yard prices have consequently increased by a range of between Sh100,000 and Sh500,000.

The price of second-hand cars has increased by up to 29 percent or Sh500,000 due to a rise in the cost of buying and shipping automobiles from Japan.

Car importers say purchase prices in Japan, the major source of most used vehicles, increased by between $1,000 (Sh108,200) and $1,500 (Sh162,200).

The dealers attribute this to tougher economic conditions that have caused people to keep their cars for longer than usual, restricting supply to markets such as Kenya.

The economic uncertainty triggered by the Covid-19 pandemic has also driven consumers towards used cars as workers drop their quest for a big investment in new vehicles during a recession.

Shipping costs for a used car from the Asian nation on the other hand have jumped to $1,200 (Sh130,000) from $1,000 (Sh108,100) due to a shortage of ships and containers.

A global surge in demand for certain goods during the pandemic has upended normal trade flows, causing bottlenecks and leaving empty cargo containers stranded.

Most of the current stocks of used cars were shipped in when the local currency had depreciated 7.8 per cent against the US dollar, further inflating their final prices.

Mazda Demio, Toyota Fielder, Toyota Rav 4, Toyota Vanguard and Nissan X-Trail are some of the popular models whose yard prices have consequently increased by a range of between Sh100,000 and Sh500,000.

“The prices of used cars in Japan have gone up, there is also low production of new cars and people are holding on to their old units,” said Charles Munyori, the secretary-general of Kenya Auto Bazaar Association, which represents used car dealers.

“For example, a Mazda that we previously bought at $3,500 (Sh378,000) in Japan is now going for $5,000 (Sh540,500).”

Vehicles from Japan dominate the Kenyan second-hand car market, taking more than 80 per econ-used car pricescent of the market share.

The reduced supply, rise in shipping costs and the weakening of the shilling have forced dealers to pass the increased costs to buyers in an economy still struggling to regain its footing in the wake of the coronavirus fallout.

A 2013 Nissan X-Trail is now retailing at Sh2.2 million, up from Sh1.7 million in January, the highest price escalation of all second-hand cars sampled.

A Toyota Vanguard (2013) model is going for Sh2.8 million from Sh2.4 million in January while the price of a Toyota Premio (2014) has gone up to Sh1.9 million from Sh1.6 million.

The price of a Mazda Demio manufactured in 2013 has gone up to Sh750,000 from Sh650,000 in January. The car is popular among drivers allied with ride-hailing services such as Uber and Bolt.

But dealers are staring at reduced sales in a market where the more a car remains at the yard the more it loses value, partly due to a greater preference for the latest number plates.

Small business owners and professionals are the main buyers of second-hand cars and their incomes have taken a hit due to layoffs, unpaid leave, salary cuts and collapse of activity in various sectors.

“Right now, imports are few and as a car dealer, you cannot buy a vehicle that you are not going to sell,” Mr Munyori said.

2021-04-27 07:30:00


www.businessdailyafrica.com


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