Economic slowdown cuts sales of new cars by 20pc

What you need to know:

  • Major vehicle dealers recorded reduced orders running into hundreds of units
  • Nearly all the dealers including Isuzu, Toyota Kenya and Simba Corporation — which sells BMW cars and Mitsubishi trucks among other brands — recorded reduced orders
  • The dealers have attributed the decline to reduced economic activity brought by tighter credit markets and political uncertainty

Sales of new motor vehicles dropped 20.3 per cent to 11,044 units last year, with major dealers such as Isuzu East Africa and Toyota Kenya recording reduced orders running into hundreds of units.

This is the second consecutive sales fall after the dealers sold 13,869 units in 2016 and 19,966 vehicles in 2015 — the peak year— according to data from the Kenya Motor Industry Association (KMI).

Dealers have attributed the decline to reduced economic activity brought by tighter credit markets and political uncertainty in the recent General Election.

10pc growth forecast

KMI’s chairperson Rita Kavashe, who is also the chief executive of Isuzu East Africa, said in a recent interview that sales bottomed out last year and are forecast to rise by up to 10 per cent this year.

Nearly all the dealers including Isuzu, Toyota Kenya and Simba Corporation — which sells BMW cars and Mitsubishi trucks among other brands — recorded reduced orders last year.

Market leader Isuzu, which sells its namesake commercial vehicles and Chevrolet cars, saw its sales drop to 3,940 from 4,858 in 2016.

Orders for its top rival Toyota, including Hino buses and trucks, also fell to 2,508 from 2,778 over the same period when Simba’s sales declined to 1,785 from 2,343.

Bank financing

Most new vehicle purchases are financed by banks, with the credit crunch directly hurting sales in the industry.

Banks have responded to the capping of interest rates by lending to the government and blue-chip firms, locking out a large number of prospective individual and SME borrowers.

The lenders say the thinner lending margins in the current environment cannot accommodate riskier borrowers, a move that has led to a major credit slowdown.

The run-up to the August general election also led to suspension of vehicle purchases among other capital investment decisions, with the uncertainty extended by the nullification of the presidential results and orders for a new poll.