Auto sales to November fail short of 2021deals
By Remie OTIENO
New vehicle sales remained strong in November but fell short of last year’s performance, bringing year-to-date (YTD) total sales to 11,962 for 2022, the latest data by the Kenya Motor Industry Association (KMIA) shows.
It means that the auto sector has sold 788 less units at this stage of the year compared to a similar period 2021.
Sales had slowed significantly since rebounding in the third quarter form what has been a generally ‘good’ year hampered by elections and other external factors like the war in Ukraine when vehicle manufacturers were able to fulfill order backlogs and dealers restock as supply chain shortages eased.
The easing of supply chain bottlenecks was attributed to the improved sales, albeit marginal, coming on the back of August 9 general elections which had contributed to low sales months earlier.
The weakening consumer sentiment due could also be as a result of the fact that most consumers are now focused on the holiday festivities with car purchases no longer a priority to the majority of the consumers.
Generally, the consumers’ preference for SUV and light commercial vehicles has continued to grow in the last months, making up a chunk of total cars sold in 2022, with the likes of Simba Corporation unveiling the PROTON X70, the flagship model of the Proton brand in the Kenyan market this month, pointing to a growing appetite for the SUV segment.
The PROTON X70 is a luxury SUV produced by the Malaysian car maker PROTON.
“We started this journey two years ago with the assembly of the Proton SAGA at our AVA facility in Mombasa. The local assembly of Proton SAGA has helped us to introduce the Proton brand into the Kenyan market,” commented Dinesh Kotecha, CEO of Simba Corporation during the launch, projecting a “better than expected year” for auto dealers.
Typically, the months of September, October and December tend to see car manufactures extend discounts to get sales across the line, but with the Central Bank of Kenya aggressively hiking interest rates recently to fight inflation, consumers could in the coming months find the cost of financing a new car suddenly a lot higher than it was previously.
In return, that could cut the demand and add new pressure to the auto industry, which had been struggling with depleted inventories during the pandemic even before the European war broke in February.
Indeed, Kenya’s annual inflation rate has accelerated over the past months hitting 9.5 percent last month and 9.6 percent in October from 9.2 percent in September and above market forecasts of 9.5 percent.
It was the steepest inflation rate in May 2017, breaching the upper limit of the central bank’s target range of 2.5 percent-7.5 percent for the fifth month.
Inflation is the increase in goods prices, whereas recession is a steep decline in business activities, and therefore, consumers who need a new car are immediately faced with paying an exorbitant amount to get a new car.
While there’s no clear view of how these changes might be or how exactly businesses will react in the long term as inflation concerns continue to threaten, it is widely expected –judging by economic trends that consumers in the sector will begin to have an improved level of confidence going into the new year with less economic disturbances.
The increase came even as the Central Bank of Kenya (CBK) raised the key lending rate to 8.75 percent, as it struggles to tame inflation.
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