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A growing number of auto dealers around the country has seen a noticeable drop in January’s retail sales and customer traffic in showrooms, raising the possibility that recent government directive to freeze new development projects is taking a toll on the auto industry.
“I think this can be explained by the fact that the government stopped development projects which normally affect sales of commercial vehicles that heavily relies on infrastructure projects by the government,” said Stephen Mbuthi, a motor expert “Other than that I cannot see any major reason.”
In July last year, President Uhuru Kenyatta issued a directive to government accounting officers to put on hold new development projects until the ongoing ones were completed. The new projects, he directed, would only be sanctioned by the National Treasury.
That decision, meant to stop wastage of government resources, is now moderating sales of new cars and particularly commercial vehicles, if the latest figures are anything to go by.
The latest data by Kenya Motor Industry Association (KMI), shows a dip in the number of new vehicles sold locally in the first month of the year at 835 vehicle units compared to 936 sold in January 2018 with commercial vehicle class largely affected.
Common vehicle brands such as Isuzu EA, a major assembler of commercial vehicles sold a paltry 259units this January compared to 278 it sold in the same period last year, an indication that orders for such class of vehicles by the government has slackened. Vehicle firms rely on government contracts to increase their sales.
But executive director of Simba Corporation Dinesh Kotecha says the industry should not fuss, arguing that it was too early in the year and that the situation would improve in the coming months.
He however blames the slight dip to recently delay in the production of car number plates by the National Transport and Safety Authority (NTSA) which had faulted lack of raw materials for the cause of delay that had affected thousands of car registration at the port of Mombasa.
“It is too early in the year to think the trend will sustain. But I blame it on NTSA delay in the production of car plates that we saw last year, but the market will catch up from February and the year could be better than 2018 because of stable economy and government’s intervention to improve the sector,” said Kotecha.
Some of those interventions include the proposed ban on importation of second-hand vehicles and particularly those with 1500cc engine capacity and older than three years, expected to begin in June 30 as the government embarks on a free-wheeling implementation of a draft copy of Motor Vehicle Policy (MVP).
“The first year from June 30, no vehicles above 1500cc will be imported into this market more than five years old, the following year the same engine capacity will be slashed to three years and the year after we will lower it to one year and later to zero,” said cabinet Secretary in the Ministry of Industry, Trade and Cooperatives Peter Munya last month.
The new piece of legislation is meant to shield local vehicle manufacturers from what new vehicle dealers believe is unfair market competition brought by importers of second-hand vehicles.
It seeks to lower the age limit of car imports coming into the country from 8 to 5 years while at the same time guaranteeing tariff-free to some vehicle parts being produced in the country.
The government, further targets to reduce the level of motor parts importation in order to make it possible for local companies to buy from local manufacturers of vehicle parts as well as invent reduced tariffs for local car assemblers, lower high costs of additional taxes, charges, levies as well as logistical charges to grow the industry and make it competitive.