The rich also cry: Why super-rich are no longer buying luxury cars

Top-of-the-range models distributor Inchape Kenya says it sold three BMW units in the first half of this year compared to 18 last year. [iStockphoto]

The prices of food, energy and other necessities are soaring locally, hitting poor people hard.

Accordingly, Kenya’s middle and lower-income groups have been ditching discretionary spending.

But Kenya’s super-rich - long seen as inflation-proof - now appear to be conscious of the prevailing hard times and are no longer buying their favourite luxury cars.

This is according to the official data, which shows sales for premium car brands are slowing.

After decades of economic boom, the sight of a sleek Lamborghini or polished Bentley in Nairobi’s upmarket districts, the flashiest hotels or the most exclusive nightclubs in the city is becoming rare.

The sales for top-of-the-range models, including some of the most expensive luxury cars, are plummeting as economic slowdown and recession fears hit consumer confidence.

Auto dealer DT Dobie said it sold 102 units of the Mercedes Benz in the first half of this year to July compared to 2022 compared to 132 units in a similar period last year.

Inchcape Kenya Ltd, the official Jaguar Land Rover and BMW distributor in the country, said it sold three BMW units compared to 18 units last year.

At the same time, Inchcape said it sold three units of the Ranger Rover in the period under review compared to 12 units in a corresponding period last year.

Status and class

The drop in sales of luxury cars comes against a backdrop of slowing economic growth.

Top executives, including lawyers, doctors and accountants, are among the professionals who can build up a net worth exceeding $1 million (Sh145 million) from salaries, stock options and profit-sharing arrangements.

Companies have been implementing austerity measures in response to the economic fallout from the recent economic slowdown. The cost-cutting measures mirror those of the Covid-19 pandemic era. They included retrenchments, salary cuts and bonus freezes, which hit the professional class.

Luxury cars are often associated with status and success. They are a symbol of wealth and power, and owning one can make a statement about who you are and your achievements, according to one auto dealer.

In popular culture, luxury cars are often featured in music videos, movies, and TV shows as a symbol of success and a luxurious lifestyle.

And the country’s class of the newly super-rich (nouveau-riche), who are simply looking for ways to express themselves, have been gobbling up the world’s priciest autos.

Rising incomes and a young population eager to flaunt its wealth have hitherto been fueling the demand for luxury cars in Kenya.

That growth has put more money into peoples’ pockets and made a broad range of cars more affordable to fast-rising, tech-savvy young professionals with a hunger for speed and luxury.

Kenya’s very rich seek super-luxury. Growing wealth has also been attracting more investment by luxury brands in Kenya.

Kenya’s group of high-net-worth individuals, defined as those with at least $1 million (Sh120 million), including their primary residence, has been on the rise as the economy expands.

Africa’s rich suffered the most from the economic impact of the pandemic, with one report by AfrAsia Bank saying the share of super-rich persons in the continent dropped by nine per cent in 2020 at the height of the pandemic.

Other restrictions

The shifts emerged in a year of hard economic times in the country in the wake of Covid-19, which resulted in a drop in corporate profits, and triggered job cuts and dividends freeze in firms owned by the wealthy.

The pandemic in 2020 also saw the bear run on the Nairobi Securities Exchange (NSE) intensify and lower property prices and valuation of private companies as lockdowns and other restrictions eroded revenues.

Kenya has been consistently ranked top 10 among countries with the highest concentration of billionaires in Africa.

At the lower end of the pyramid, many middle-income class Kenyans say they have said goodbye to discretionary costs, including dining out or vacations - things they say they enjoy but now don’t necessarily need on the backdrop of the cost-of-living squeeze.

They are also looking to cut fixed expenses and essentials such as rent, food, and transit costs by looking for cheaper alternatives even though there is less flexibility there.

For instance, many motorists said they have dumped their cars for public means. Public transport users say they now opt to walk to work instead of taking the bus or matatu.

House renters say they have moved out to cheaper housing.

This comes as hard-pressed consumers search for deals and some much-needed relief from soaring costs on just about everything.

The rising costs of goods are shaping consumer decisions as they choose to eat in and spend less outside their households.

This comes as higher transport and food prices, along with other rising costs, take a toll on everyone’s wallets.

Additionally, consumers are largely “trading down” to more affordable brands within categories or switching to private-label products. Private label sales have been on the rise for years, but the cost-of-living crisis driven by soaring energy prices appears to be turbo-charging the trend.

A private brand is a good that is manufactured for and sold under the name of a specific retailer, competing with brand-name products.

And Kenyans are looking for other ways to save.

With inflation soaring, cost-conscious streamers are questioning which subscription services are “must-haves” and which they can comfortably live without.

A majority of Kenyans are considering or have already cut their monthly subscriptions like television to rein in their spending.

Weakening shilling

With inflation making almost everything more expensive, especially many of the everyday necessities like food, gas, and utilities, more expensive cable TV has become a luxury for a majority of Kenyans. This has seen many tighten their TV entertainment wallets.

A weakening shilling is causing pain to consumers across the country, hindering the government’s efforts to rein in the stubborn cost of living. Kenyans are forking out more to purchase basic commodities as the shilling continues to weaken due to external pressures.

The financial hardships are squeezing consumers hard, posing an economic and political problem for the Kenya Kwanza administration, which is now almost a year into its five-year reign.