Car dealers take a hit as sales drop on tough economic conditions
By Macharia Kamau | November 3rd 2016
The number of new vehicles sold in the country declined sharply in the first nine months of the year due to a harsh economic environment.
Dealers in new motor vehicles reported a combined 31 per cent drop in sales, selling 10,368 units in the period between January and September this year compared to 15,101 units moved over a similar period last year.
Kenya Motor Industry Association forecasts sales for the fourth quarter of this year to stand at 3,632 units, bringing the total number of new vehicles sold in 2016 to just about 14,000. This would translate to about 30 per cent reduction in sales when put in comparison to the 19,524 new vehicles sold last year.
It is the first time that growth in sale of motor vehicles has slowed down over the last six years. The industry has steadily grown since 2011 when it sold 11,050 new vehicles to last year when it sold over 19,000.
General Motors East Africa (GMEA) Managing Director Rita Kavashe (pictured) said a mix of factors has contributed to decline in sales, including a harsh operating environment that has seen corporates cut down on spending.
“The market has not been doing very well this year. Few market segments are buying and sales have mostly been driven by SMEs buying for their businesses as well as individuals buying for personal use. This is a good market, but their purchases are usually under Sh4 million,” she said.
A more recent development has been the capping of interest rates. Though expected to spur borrowing following the availability of cheap credit, lenders have introduced measures that might further limit access to credit.
“Many banks are still figuring out how to respond to the amendment in the Banking Act capping interest rates. While it was expected to increase lending, some banks have introduced new dynamics like processing fees and other requirements that have in a way limited borrowing,” said Ms Kavashe.
She added that major customers for the motor industry have been hit by failure by the State to pay for services and products at both national and county levels.
In the course of this year, GMEA has had the largest market share at 34 per cent, followed Toyota (19 per cent) and Simba Colt (16.5 per cent).
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