Vehicle Ages

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The issue

The average age of vehicles in Kenya is about 15 years – that is double the world norm and three times the average of the most efficient road transport systems.   

What are the impacts of this situation, and what policy measures could remedy the problem?

Summary

The age of vehicles has a major impact on the economy. As vehicles get older their efficiency declines and their operating cost increases. The rate of this process varies;  the certainty does not. Multiplied across a national fleet of a million vehicles, high average age  can add tens of billions of shillings per year to operating costs and efficiency losses.

It is therefore in the interest of any economy to encourage the use of the newest possible vehicles, and discourage the use of older vehicles.  In every respect, the principle of “the newer the better” applies.

The difference is so certain and so significant that successful economies throughout the world engage policies to directly prohibit or effectively deter use of vehicles beyond their viable design life, and to encourage replacement well before that breakpoint. Tax penalties and high standards of roadworthiness, strictly enforced, are their primary tools.

Kenya’s current vehicle supply policies achieve the exact opposite, by placing the most severe and most strictly enforced tax burdens on new vehicles, while granting the greatest tax and standards concessions (both formally and informally)  to old ones.

Because the operational age and condition of a vehicle involves  so many variables of time and usage, limits based on age alone or mileage alone are arbitrary and often anomalous. The year of manufacture can be a good general indicator of a vehicle’s probable condition and residual life, but may not be not a sufficiently consistent or reliable basis for prohibitive legislation.

Fairness, freedom of choice and the best possible transport economy outcomes will be achieved by allowing consumers personal choice  -  within a policy framework that gives them compelling reasons to make personal choices which are in the best national interests. That means ensuring advantageous conditions for consumers who invest their money in vehicles of the highest quality and national value, and imposing deterrent penalties on consumers who wish to import vehicles of lower quality, poorer operating efficiency or less residual life.  

Market forces will then ensure the best possible balance between personal affordability and national efficiency.

Impacts of aging

All vehicles deteriorate with time and use. No matter what, through progressive wear-and-tear they:

  • lose power
  • consume more fuel
  • emit more toxic exhaust fumes
  • become less durable
  • suffer more breakdowns (downtime, parts replacement)
  • lose control precision (steering, brakes etc).
  • become more susceptible to control-systems failure (accidents)
  • require  (exponentially) more repair and replacement parts

Also, all aspects of comfort, safety and cosmetic condition decline…with every year that passes and with every kilometer travelled.  Maintenance, repair, replacement and restoration to off-set these effects becomes progressively more expensive and ultimately unviable.   

Rate of aging

The rate of time-use (“age”) decline broadly depends on:

  • quality of design and materials used in construction - varies by class, make and model
  • suitability of vehicle specifications for purpose and place - tropicalization (of several dozen key components), load ratings, etc.
  • the amount of use (mileage) - distances of 10,000 to 20,000 kms (median 40 kms per day) are in the normal range for passenger cars. Many commercial vehicles travel more than ten times that distance in a year (urban buses average more than 200 kms per day;  long haul buses can exceed  600 kms per day).
  • prevailing road (and regional) conditions - from road roughness and dust levels to ambient temperatures, humidity etc, affect “aging”. Kenya is a harsh environment in some of these respects.
  • driving style - harsh or very gentle driving can make an extreme difference. Driving practices in Kenya are generally not optimal.
  • other usage factors - level of loading, whether urban or long-distance etc. Overloading and other inappropriate use is  common in Kenya.  
  • the discipline and proficiency of maintenance - differences can be extreme, and standards in Kenya are generally poor. 

Clearly, there can be considerable variations in any one or all of those factors in an individual vehicle,  making any universal presumption of condition based on chronological age or mileage arbitrary, even to the extent of vehicles aging at less than half or more than double the statistical average. 

However, taking the median of all those factors, corroborated by market actuarials, it is possible to establish useful indicators of general vehicle viability phases and average (normal/general/majority) lifespans. These are very meaningful for overall policy and planning purposes, but not for one-size-fits-all legislation.

On that basis, the universally recognized viable design life of a car is 15 years.

Phases of aging

Phase One

Generally, performance and operating costs are optimal in the first five years of a vehicle’s life. They are at their most fuel efficient and require no replacement parts other than routine service items. Approximately 10% of vehicles in Kenya are in this category. Only 20% of vehicles entering Kenya each year for replacement and growth are in this age bracket.

Phase Two

By the age of 10 a vehicle’s operating costs double. Fuel consumption and exhaust emissions increase, and components which are less robust and most subject to wear increasingly require replacement. Approximately 20% of vehicles in Kenya are in this category. Some 80% of vehicles entering Kenya each year are nearing the end of this  age bracket when they first arrive.  The better  half of their viable design life has already gone…to the benefit of another economy.   

Phase Three

By the age of 15  years operating costs double again…or vehicles suffer severe a decline in performance, reliability and roadworthiness.  Even more robust and major components start to fail, earlier replacement parts become worn out for a second time, and general performance and reliability are significantly compromised.  The viability of continuing to operate the vehicle becomes marginal.  Approximately 40% of vehicles in Kenya are in this category.

Phase Four

Above 15 years, most vehicles are beyond their viable design life.  The majority  become an economic liability, either through the direct high costs of keeping them in good condition, or the indirect high costs of failing to do so. Approximately 30% of Kenya’s total national fleet is operating in this age phase, and the majority of these vehicles are not fully functional and/or are not roadworthy. They still have their uses for individual owners, but their utility value is much reduced.

Technical obsolescence

Because technology is constantly advancing, even vehicles which are used and maintained in good condition become sub-standard – in some respects dramatically and quite quickly (technical changes are especially rapid on elements fuel economy, exhaust pollution, safety and service regimen).

As a perspective, Kenya’s elderly national fleet is the equivalent of running the country on computers with hardware, operating systems and applications that are 10 years out-of-date.  It is well understood by all companies, individuals and the State that using obsolete computer systems is a false economy – that there is greater benefit in investing in newer and updated equipment. Indeed, updating is imperative.  The same principle applies to all motor vehicles – by design.

Fuel economy

Over the past 10 years (and the majority – 70% -  of vehicles in Kenya are older than that), the fuel economy of passenger cars has been improved by up to 20%, with at least concomitant reduction in exhaust emissions. As the fuel consumption of an older car will also have increased since it was new, the difference today between a 10-year-old car and a new one is even greater. On a national scale, the high average age of Kenya’s national fleet translates to an additional fuel consumption of more than 1 million litres…per day.

Safety

Over the same period, there have been major advances in safety design, now measured by a system called N-CAP, which indicates the chances of driver/passenger survival or avoidance of serious injury in the event of a severe accident. The majority of modern cars have a rating of 4 or 5. No vehicle built more than 10 years ago would have  a rating higher than 3, and many older models operating in Kenya would be rated 2 or less. Modern cars are significantly safer, not only for the occupants but also for other road users (including pedestrians) in the event of a collision.

The economic impact of “newer”  is a certain (though not specifically quantifiable) reduction in direct road accident costs, which in Kenya are currently estimated at shs 40 billion per year. The merits of newer vehicles would, of course,  also reduce immeasurable indirect costs in human suffering and loss of human resource.

Service 

In parallel,  design improvements, computerized diagnostics and materials quality have increased routine service intervals four-fold. Servicing older cars is more frequent, more time consuming and more expensive.  

Kenya’s fleet profile

An estimated 30% of all vehicles operating in Kenya are more than 15 years old,  and at least that proportion are in phase four condition. Their ongoing use is sustained either by uneconomic levels of repair and replacement to ensure roadworthiness, or by tolerance (by owners and the state) of extreme levels of defect and operating inefficiency.

These, and vehicles aged 10-15 years and therefore nearing the end of their viable lifespans, constiutute 70% of all vehicles operating in Kenya. The predominance of used imports has created this age profile, and is preventing fleet age recovery. 

Further, 80% of all vehicles added to the national fleet each year are 8 years old…on first arrival in this market.  The Kenyan economy has had no benefit whatsoever from their Phase One life.  They arrive at the very end of Phase Two, with half their life (the best half) already gone, and when all aspects of wear are about to go into steep decline and when operating costs are likely to start increasing exponentially.   That is the very reason they are available at lower cost on the world market.  For their source countries, selling them is more economic than keeping them.

When these vehicles continue to operate beyond their viable design life in Kenya, there is no compensatory history.  They have never paid new vehicle duty or tax in Kenya.  They have not delivered many years of optimum performance or lowest-level operating cost in this market.  Overall, the majority of their time-use will be a liability to Kenya’s economy – either through the direct expense of maintaining them to a good standard, or the even higher indirect costs of failing to do so.

Certainly, very old vehicles continue to operate in many countries. But the proportion  over 15 years old is small (less than 10%).  Most importantly,  all such vehicles which may now be an economic burden started life brand new in that market:  the economy in which they continue to operate has enjoyed the full benefit of their original duty and tax revenues, and their optimum benefit utility through their most viable life phases.  Overall, the majority of their time-use has been an economic benefit to the market in which they have operated throughout. 

Policy obsolescence

Unequivocally,  for the past 20 years (since the advent of liberalization) Kenyan policy has encouraged the importation of used vehicles, under conditions of unassailable advantage over the new car market  and to the long-term detriment of the national fleet.

There have been a number of compelling reasons for this policy, including many socio-political considerations such as developing a low-budget entry point for a new cadre of car owners and motor sector  entrepreneurs. Also, 20 years ago Kenya had an acute vehicle shortage (following decades of foreign exchange restriction) and market purchasing power was not sufficient to rapidly make up the back-log with new vehicles.   

These policy imperatives were valid short-term measures, but they had long term penalties:  they immediately wiped hundreds of billions of shillings of asset value off all existing vehicles in Kenya, they almost closed down vehicle assembly operations, they did close down numerous component manufacturing industries, they greatly reduced formal motor sector investment, and they relinquished major revenue streams.

Over the past 20 years they have created a severely over-age fleet, are now overwhelming road capacity with punishing operational consequences, they have spawned a used parts market with serious safety risks and poor revenue returns, and through subsequent resales have created a cadre of very low budget owners who are able to buy a car but have no possibility of maintaining it properly.  

Today, the initial reasons for the policies have long-since been fulfilled. The penalties now far outweigh the benefits, and used imports are indeed defeating the original policy purposes. They are increasing the cost of motoring, and reducing the efficiency of the road transport system on which economic growth – and hence “affordability” of anything and everything – depends.  

Policy priorities

Kenya’s per capita GDP dictates that the overwhelming majority of the population will remain dependent on public transport for mobility, no matter how low the acquisition price of used imports becomes.

Even after the recent quadrupling of the national fleet, the overall ratio of population to vehicles is 40:1, and the ratio of population to accessible passenger carrying vehicles is more than 100:1.  

The highest road transport priority is the development and growth of efficient and safe public transport. Motorcycles must be recognized as a growing component of that system.

Because the population is growing so rapidly – it is already above 40 million and is projected to nearly double in the next 20 years – with a parallel increase in construction, business and general supply activity, there will be massive increase in demand for goods transport.

The capacity and efficiency of goods transport is especially crucial.  The railways must be recognized as an essential component, to exploit economies of bulk/scale and alleviate road burdens.

To meet these two most pressing road transport requirements, there will need to be massive and sustained national investment in buses and trucks. 

For reasons of safety, reliability and operating economy/efficiency, this vehicle supply should enable and encourage user investment in new vehicles.

Because the national spend on buses and trucks will perforce be so great,  the investment should be used to maximize benefits other than just vehicle supply – by sourcing all buses and trucks through local assembly, and thereby driving industrialization.  

Kenya now has more than one million road-going vehicles of all kinds, and in many crucial areas road capacity has been overwhelmed to the extent that additional vehicles intended to improve mobility are actually decreasing mobility (through congestion).

The growth in national fleet numbers needs to slow down, while the growth in road construction needs to speed up.  

For all the foregoing reasons, policy needs to focus on the quality rather than the quantity of passenger car supply, and ensure tax and standards incentives/deterrents support the principle of “the newer the better”.      

To improve the long-term profile of the national fleet, for the national benefit,  policy should target at least doubling the inflow of new vehicles and deterring the importation of used vehicles  that are no longer in Phase One of their viable lifespan.

Proscriptive measures are not necessary to achieve this. On the grounds of national value, and the certainty that vehicle values are greatest in the first five years of their life, depreciation for import duty calculation should STOP at three years. Duty on any vehicle older than that should be calculated as if the vehicle was only three.

Consumers would be free to import whatever vehicle they wished, of any age, but on  the duty quantums that would result from a three-year depreciation limit,  the importation of old or low quality or poor condition vehicles would not be viable.  Without prohibitions, market forces would ensure the desired result of “the newer the better”.

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