By Allan Olingo

More by this Author

The 2,700 vehicles that the Kenya government had leased from several car dealerships in 2014 will be sold in the local used car market as the government finalises plans to lease a new fleet of 1,380 cars.

The move is expected to check the import bill on used cars, while at the same time affording a new, better fleet for the Police Service and civil servants. Kenya is trying to modernise equipment used by the police and other law enforcers in the face of rising insecurity occasioned by rising crime and terrorism.

The EastAfrican has learnt that Treasury has signed a $134.7 million contract with dealers for the new fleet on condition that the 2,700 cars it leased three years ago at a cost of $67 million be traded in.

Under a trade-in deal, an owner surrenders a used car to a dealer and selects another, and after the two units are assessed, a barter price is agreed on.

The increased outlay for a smaller fleet suggests that the government is getting pricier, fit-for-purpose vehicles but also more expensive to maintain.

The government has doubled the allocation for the vehicles leasing programme in the new contract from the initial $67 million in 2014 to the current $134.7 million, a clear indication that the newer models it is set to receive will be slightly costlier to rent and also use.

“Treasury has already sent out a notice to the vehicle dealers announcing its new plans to lease, with each dealer getting their specific vehicle quotas. The memorandum notice and subsequent contracts were sent out to the dealers early this month. They were supposed to be signed before the Christmas holidays but this has been pushed to January,” The EastAfrican was told.

Beneficiaries

In the notice, Toyota East Africa will be the biggest beneficiary as it will lease out 700 units of Land Cruiser pick-ups and 100 Toyota caravans units.

General Motors Kenya, which trades as Isuzu East Africa will lease to the government 280 trucks, four buses and 120 double cabin pick-ups.

“From the $131.7 million funds, more than $89 million will come from the security budget which had been factored in in this 2017/18 financial year. So far, we have been able use these vehicles for a fixed four year period while paying monthly fees. The maintenance has been done by the dealers and it has been a very good saving front for us especially on the upfront costs,” The EastAfrican was told.

Under a leasing arrangement, the dealer maintains the fleet.

Subaru Kenya which is a division of ECTA (Kenya) Ltd has been allocated 120 saloon car and SUVs with preferences on the Subaru Outback and Forester models, largely used by the criminal directorate department, while CMC Motors will lease out 60 single cabin Ford pick-ups.

“There are still some issues on extension of some leases but the government has so far been adamant that it wants to let the leases run out and enter into new ones. The argument is that they want the current vehicles under lease to be sold by the dealers in the local market as used vehicles so as to reduce the vehicle import bill,” a confidential source privy to the discussions said.

Rising imports

Data from the Japan Used Motor Vehicle Exporters Association (Jumvea) shows that the number of second hand vehicles brought in the 10 months to October this year rose by 35 per cent to 61,488 vehicles as compared to 45,540 units a year earlier. 

The country has also over the years seen a steady rise in the importation of used car from Japan to reach 51,130 in 2016 from and 40,546 ten years ago.

The country’s import bill has also risen to $11.48 billion in October from $9.4 billion over a similar period last year.

In 2015, Treasury, through its budget policy statement said that it would give a bigger share of the leasing contracts to Kenyan motor vehicle assembly firms to activate the used car market once the lease runs out.

Majority of Kenyans cannot afford new vehicles because of their exorbitant prices, preferring instead to import used Japanese cars. Treasury said it wanted to use the leasing programme as an opportunity to allow its used vehicles to be circulated in the existing used car market by the dealerships.

“The move is expected to encourage motor vehicle assembling, support growth of backward and forward industries, boost secondary market of vehicles and generate additional employment opportunities,” Treasury said in the 2015/16 budget policy statement.

Local assemblers

General Motors East Africa, Kenya Vehicle Manufacturers, Toyota Kenya and Associated Vehicle Assemblers are among local assemblers who have benefited from the lease contracts, and will now be expected to sell the government used vehicles locally.

In the new contracts, the government argues for a second round of leasing by citing the almost 100 per cent minimum fleet availability, straight line costing for easy planning and detailed reports that include the cost per kilometre, trend use and accident and utilisation analysis.

Kenya adopted the vehicle leasing programme in 2013 to access an increased number of well-maintained and utilised vehicles. Since then, the country has leased more than 2,720 police vehicles in a move aimed at cutting costs and improving police mobility.

In 2014, six auto dealers were shortlisted for the $29 million leasing contract to supply the Police Service with 1,200 utility vehicles and saloon cars.

READ: Kenya looks to increase duty on EAC car imports

ALSO READ: Kenya to impound cars bearing old South Sudan plates