Economic slowdown cuts sales of new cars by 20pc
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.
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