Japan’s motor vehicle manufacturing industry is showing renewed strength in 2026, with rising production and a growing push into hybrid and electric vehicle technologies, even as the country continues to dominate Kenya’s used-vehicle import market.
Japanese vehicle production rose by about 2.2 per cent year-on-year in the first five months of the year to 3.52 million units, pointing to a gradual recovery in one of the country’s most important manufacturing industries.
The recovery gathered pace in June, when monthly production increased 6.8 per cent year-on-year to 737,488 units.
The positive performance underlines the continued importance of Japan’s automotive industry to global vehicle supply chains and its deep connection with Kenya’s motor vehicle market.
Japan remains Kenya’s leading source of second-hand vehicles, accounting for about 80 per cent of imports, according to industry data.
Other major sources include the United Arab Emirates and South Africa, while China is emerging as an important supplier, particularly in electric vehicles.
Japanese brands, led by Toyota, continue to enjoy strong demand in Kenya because of their reputation for reliability, availability of spare parts and relatively affordable operating costs.
The strong manufacturing performance comes as Japanese automakers navigate major changes in the global vehicle market.
Traditional manufacturers are expanding their hybrid and electric vehicle offerings while maintaining strong investments in conventional vehicles, reflecting differences in consumer demand across markets.
Toyota, in particular, continues to benefit from strong demand for hybrid vehicles as the global transition towards cleaner mobility accelerates.
Japanese manufacturers are increasingly relying on technological partnerships and expanded electric vehicle line-ups to compete in a rapidly changing global market.
For Kenya, however, Japan’s importance remains concentrated in the second-hand vehicle market.
Thousands of used Japanese vehicles enter Kenya every year, with popular models including Toyota Probox, Subaru Forester, Mazda Demio, Nissan Note, Nissan Dayz and Suzuki models.
Their popularity has helped create a substantial ecosystem involving importers, clearing agents, transporters, dealers, mechanics and spare-parts businesses.
But while Japanese vehicles remain relatively affordable in their source market, Kenyan consumers are increasingly struggling with the cost of bringing them into the country.
A Toyota Probox, for example, can cost between $3,000 and $7,000 in Japan, depending on its age and mileage.
In Kenya, the same vehicle can retail for between Sh1.2 million and more than Sh2.5 million after taxes, duties, shipping and other costs are factored in.
The widening price gap has become a major concern for dealers and consumers, with industry players blaming the high cumulative tax burden and uncertainty around customs valuation.
Under the current framework, import duty is charged at 35 per cent of customs value, while excise duty ranges between 20 per cent and 35 per cent depending on engine capacity and fuel type.
A 16 per cent VAT is also imposed, alongside the Import Declaration Fee and Railway Development Levy.
The result is that taxes on some vehicles can approach or even exceed the original purchase price.
For instance, the cost pressures have pushed the price of a Mazda Demio to above Sh1.7 million from an average of about Sh1.35 million.
A Nissan Note now sells for around Sh1.5 million, compared with approximately Sh1.1 million previously, while the price of a Nissan Dayz has risen to about Sh1 million from roughly Sh800,000.
The higher costs are weakening demand. Dealers report declining sales as consumers struggle to raise additional funds when vehicles arrive at the Port of Mombasa and customs assessments are higher than expected.
Vehicle imports fell sharply from a peak of 126,415 units in 2021 to 70,275 in 2023, although there was some recovery in 2024.
Industry players argue that predictable customs valuation would help restore confidence and enable importers to accurately price vehicles before they arrive.
Car Importers Association of Kenya national chairman Peter Otieno describes the situation as “customs roulette,” where importers cannot predict final costs.
“The greatest enemy of any business is not high taxes, it is unpredictable taxes,” Otieno said, “How can a professional importer quote a customer, only for the value to change upon arrival?”
The Kenya Revenue Authority maintains that vehicle taxes are applied according to the Common External Tariff and regional customs laws.
It has also said the 2019 Current Retail Selling Price remains in use as directed by the courts, while vehicles not captured in the database are valued under the East African Community Customs Management Act.
Kenya has set an eight years rule on used vehicles, based on the vehicle’s first registration.
Vehicles currently being imported under the current rules must therefore generally have been first registered in 2019 or later.
The government plans to progressively tighten the age requirement further, with the long-term objective of encouraging local vehicle assembly and manufacturing.
This could gradually change Kenya’s vehicle market by reducing reliance on older second-hand imports while creating opportunities for domestic assemblers.
For now, however, Japan remains firmly at the centre of Kenya’s used-car trade.
Its improving manufacturing performance means the country will continue to have a major role in supplying vehicles to global markets, even as Kenya grapples with the challenge of making those vehicles affordable to consumers.
