Covid-19 impact: Dealers of used cars forced to cut prices - report

 

Dealers in used cars were forced to cut prices between February and March in response to depressed demand in an economy reeling from the effects of the Covid-19 pandemic.

A report released by Trends and Insights for Africa – Tifa in partnership with Checki indicates that many Kenyans lost their source income and were not able to service bank loans.

As a result, Sale of cars seized by banks could have increased supply in the market, further putting downward pressure on prices.

According to the report, the Kenya Used Vehicle-KUV Price Index growth sustained a downward trend  from an index of 102.81 in February compared to an index of 67.87 in March based on fixed base Index.

The price index stood at 110.09 in April with a growth of 42.22 from March.

The Index maintained a slight change in July which stood at 120.54.

However a price increase was observed between July and August with a growth of 29.11 and stood at 149.25.

A price decrease was observed between August and September from a price index of 149.25 to 136.42.

According to the report, the Index first of its kind was developed by applying statistical analysis to a database of more than 151,000 used vehicle listed for a period of nine months  between January and September 2020.

The Index report focuses on the prices of car listings in Kenya market with an aim to measure the average price change over time.

“By comparing prices and price trends for different months, quarters or years, users of this Price Index will be able to calculate the rate of inflation,” read part of the report.

In addition to a downward trend in prices, there was a downward trend in the number of listings of vehicles during the month of March 2020 being attributed to the effects of Covid-19 pandemic.

The report indicates there was a decline in the prices of all vehicles between the months of February and March 2020.

“Significantly large declines were recorded for pick-ups, 4-wheel drives and SUVs, saloons, hatchbacks, buses, vans and mini vehicles. The prices increased between April and May 2020, with the station wagons, coupes, and 4-wheel-drives/SUVs registering the highest variation,”  Maggie Ireri of Tifa said.

According to her, a majority of the used vehicles were manufactured within the last eight to nine years  between 2012 and 2011.

“Kenya has an eight-year age limit for importing used cars. It means that most of the cars on sale are older as they are cheaper than the newer models,” Ireri said.

According to her, while Toyota was the most listed vehicle in the market compared to other vehicle models,  Nissan and Subaru’s were  a distant second and third respectively.

“The 4-wheel drives and SUV dominate the listed used vehicle market with Toyota having a majority of 4-wheel drives. The supply of 4-wheel drives and SUVs could be driven by high demand for luxury cars by affluent consumers and profitable firms whose spending is not affected by the economic turmoil arising from Covid-19,” Ireri said.

The report further reveals that Toyota, Nissan and Subaru models, 4 wheel drives and SUVs tops the list of used vehicle body type.

With regards to future trends, Ireri  said the KUV Price Index has started declining from September 2020 and is expected to continue to this until January 2020.

She said this is normal as the traders await the year to end and the cars to get older.

Last month the United Nations Environment Programme urged Kenya to tighten its restrictions on imported vehicles.

Kenya is the only country in East Africa with an eight-year age restriction for imported vehicles, but the UN says this is not enough.

In the report, Unep labeled Kenya's restrictions as 'weak', and the rest of East African countries' as 'very weak'.

“The lack of effective standards and regulation is resulting in the dumping of old, polluting and unsafe vehicles,” said Inger Andersen, executive director of Unep.

While the average age of imported used vehicles in Kenya is 7.2 years in Uganda it is about 15.4 years. Tanzania and Rwanda have no age limit but increase taxes for vehicles older than eight and 10 years, respectively.