Motor industry in decline as sales fall 27 per cent

The motor industry has sustained the drop in sales of new vehicles witnessed in 2016, with the numbers in the first quarter of this year declining by nearly a third.

New vehicle sales fell 27.4 per cent in the three months to March, pointing to a gloomy 2017 for the industry that has attracted major brands to start production locally.

According to Kenya Motor Industry Association data, dealers sold 2,687 units during the quarter, which was a dip from 3,699 units sold in the first three months of 2016. This mirrors the trend last year, where sales went down 30.6 per cent to 13,535 units.

Industry players, however, are optimistic and expect to turn around sales in the rest of the year to 15,500 vehicles, a 14 per cent increase over last year.

Almost all categories of vehicles were affected, but mini buses segment rose 25.9 per cent, medium trucks 24.3 per cent, Sports Utility Vehicles 5.6 per cent and saloon cars 6.2 per cent.

Hardest hit was the earthmovers segment, which experienced a 72.4 per cent decline, with only 77 units sold compared to 279 units in the first quarter of 2016.

Slowed down

While the sale of mini buses grew, other high-capacity vehicles largely used in public service transport as well as by institutions experienced major declines, with sales of large buses going down 41 .4 per cent and medium buses declining by 37 per cent.

The drop in the first quarter could be due to persistent harsh economic times across different sectors last year. Sectors that have been the mainstay of the Kenyan economy, including agriculture, manufacturing and financial services, slowed down owing to a mix of factors.

This may have seen many firms shelving various projects and in turn reduce the spending on items such as motor vehicles. In addition, the General Election scheduled for August 8 might also exacerbate the situation with more firms slowing down on projects.

The entire motor industry experienced a slowdown, with the number of vehicles – including second-hand imports – newly registered in the country going down 13 per cent to 213,700 in 2016, from 247,000 in 2015.

According to the Kenya Economic Survey 2017, the drop in registration of motor vehicles may be attributed to higher import taxes imposed on used cars in 2015/16 while the decline in the registration of motorcycles may be partly attributed to reduction in local demand.