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How coronavirus slammed the brakes on local car sales

BUSINESS NEWS
By Peter Theuri | August 20th 2020

As the coronavirus pandemic sweeps across the country, motor vehicle dealers have not been spared, with sales hitting new lows, an analysis of industry data shows.

In the first seven months of this year, the purchase of new motor vehicles was put on the back burner as people tended to basic needs.

Companies that were used to buying commercial vehicles in bulk also had to re-evaluate their operations, sending home workers in droves as others slashed their salaries in a bid to stay afloat under the wave of the virus that has sent economies around the world into recession.

During the period under review, Kenya Motor Industry Association (KMI) reported sales of 5,532 new vehicle units, 2,036 less than what dealers sold in the same period last year.

This was a 26.9 per cent decrease in sales, signalling how the pandemic has hit the motor industry in the country hard. While Isuzu maintained its leadership position with a 39 per cent market, it sold 2,157 units in the seven months to July, 729 units less than what it sold in a similar period last year.

Toyota and Mitsubishi, on the other hand, sold 1,349 and 672 units respectively, down from 1,818 and 1,073 units respectively in 2019.

The three brands were the leaders in vehicle sales in the country during the period under review.

While January 2020 at 803 yielded almost similar results to last year’s sales (835) and February’s 1,049 bettered 2019’s 871, the advent of Covid-19 in the country sent the sector’s fortunes into a free fall.

In March after the country reported its first case of coronavirus, sales of new vehicles plummeted to 846 before plunging to 594 in April as the effects of the pandemic started to manifest.

This was a sharp contrast to April last year when car dealers in the country sold 1,127 new units, almost double this year’s number.

Stimulus package

“Although we have experienced a decline in sales mostly attributed to the Covid-19 pandemic effects, the decline in sales is also attributed to customers putting off their purchasing decisions, especially in certain sectors like public transport and tourism,” said General Manager Sales, Marketing and Logistics at Toyota Kenya Andrew Omolo of April’s sales that were an 11-year low for the industry.

The decline was not unique to Kenya, however, with the BBC reporting that the United Kingdom had recorded a 97 per cent plunge in sales in April compared to last year.

At 4,321 units, this was the lowest monthly level in the country since 1946.

Back home, the government in a bid to cushion manufacturers and other businesses from the ensuing shockwaves caused by the pandemic unveiled a Sh53.7 billion stimulus package that helped lift sales for the industry.

"We saw improvement as the government introduced the economic stimulus package for various sectors back in May. The automotive sector was among the eight sectors selected for support with Sh600 million being set aside to purchase locally assembled vehicles,” said Director, Sales and Marketing Isuzu East Africa Wanjohi Kangangi.

“This encouraged our resilience to sustain our operations through this difficult season.”  

But with the cases of infections rising drastically in subsequent months, this optimism seems to have been wiped out, with players fearing for the worst in coming months. 

“We expect a general slowing down of customer orders as economic activities are disrupted across the country, and this will have a direct impact on production levels,” said Director Finance and Strategy Isuzu East Africa Charles Kariuki.

But a closer look at the industry trends shows that since May, the industry has clawed back some of the gains, although a full recovery is still some way off.

While July’s sales of 910 units are 344 fewer than those of the same month last year, it is better than the gap of 568 units between May 2019 and 2020. Most of the luxury vehicle brands continued to put on a strong face, however, with BMW selling 17 units in the first seven months of this year compared to a paltry four last year.

Volkswagen, on the other hand, sold 130 units, 13 units more than it sold between January and July 2019.

Porsche also saw a slight improvement, selling 15 units, up from 12 units last year.

It has taken strong willpower for the motor vehicle companies to keep going in spite of the pandemic.

Isuzu East Africa recently started the delivery of 100, 33-seater public service vehicle (PSV) buses under a leasing scheme supported by Co-operative Bank.

“This is the largest fleet delivery that the auto industry has managed to put together for the PSV sector valued at Sh530 million,” said Director, Sales and Marketing Kangangi.

And the reopening of the economy has raised hope for the industry despite rising numbers in new infections.

“Given the strong momentum seen at the end of 2019, industry volumes had initially been projected to grow to 11,640 units in 2020. However, with the Covid-19 outbreak, we expect subdued growth, with volumes projected to close at 8,580 units at the end of this year,” said Kangangi.

“Nonetheless, there’s lots of enthusiasm in the market driven by heightened activities, especially in the construction and agricultural sectors. While Kenyans have adopted conservative spending to meet their domestic needs, there is now a growing appetite for investments driven by emerging financing opportunities.”  

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Covid 19 Time Series

 

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