Motor vehicle dealers and industry stakeholders are struggling to remain profitable as the Kenya shilling continues to fall against the US dollar, eroding profit margins and increasing the cost of doing business.
The Shilling on Tuesday hit an all-time high of Sh130 against the US dollar, plunging importers already strained by disruptions in the global market into further turmoil.
Since January this year, the Kenya Shilling has lost six per cent of its value against the US dollar with analysts pointing to the increase in lending rates in the US, the war in Ukraine and supply chain bottlenecks that have been worsened by growing trade barriers between leading economies.
Motor vehicle importers and traders have been among the worst hit owing to a bulk of their trade being dollar-denominated. This has led to a significant increase in the landing cost of cars imported into the country.
"The fall of the Kenyan shilling against the US dollar has increased the landed cost of vehicles imported into Kenya," explained Autocheck Financial Services Chief Operating Officer John Egwu.
"This has driven up the selling prices by 35 to 45 per cent depending on the vehicle model." According to Mr Egwu, consumers, most of whom often rely on asset financing from banks and Saccos as compared to cash buyers, are finding it difficult to obtain financing for their dream cars.
Data from the Kenya National Bureau of Statistics, KNBS indicates that the number of imported vehicles cleared at the Port of Mombasa stood at 126,415 units, a 25 per cent increase compared to the previous year and a five-year high.
The rise in car prices that has precipitated over the better part of the past three years has also seen the price of used cars go up with exporters in countries like Japan holding on to their existing units to wait out the current currency shocks.
A Toyota Fielder that cost $10,000 (Sh1.2 million) in November 2022 today goes for Sh1.3 million sorely on account of the fall of the shilling.
Small vehicles like Toyota Vitz, Mazda Demio, and Honda Fit that are popular with first-time middle-income earners now average higher than Sh1 million, with some buyers in the country opting to buy locally used cars with bigger engine capacities.
“From our data, millennials are more receptive to vehicles with newer technological features like hybrid and electric cars," said Autochek Africa’s Global Head of Marketing Michelle Gatamah.
"This is due to their fuel efficiency and advanced features and what we have seen is most buyers in this demographic have access to asset financing with at least one financial service provider.”
The rise in green mobility and electric vehicles in the past few years has also fuelled a small but growing consumer base of car owners seeking hybrid or purely electric vehicles.