June new auto sales fall by 12% y/y in a ‘challenged’ sector

By Steve UMIDHA

Kenya’s June new vehicle retail sales fell 12% from a year earlier, an industry –driven data showed on Thursday, reflecting the changing consumption patterns of car buyers in a distraught period fraught by impulsive government policies.

Data from the Kenya Motor Industry Association (KMIA), shows that sector players sold a total of 5,086 new vehicles between January and June this year, 593 fewer the industry sold in a similar period last year when dealers sold 5,679 showroom units.

Weak retail sales of cars result in higher inventory costs that hurt dealers’ financials. Still, the SUV portfolios of companies, including that of Toyota Kenya now CFAO Motors Kenya and Isuzu EA brands, among others, benefitted from strong demand, extending improved sales in a tough market clogged with high interest rates, reduced government expenditures and a general wobbly economy.

The decline in new vehicle sales is symptomatic of the current challenging economic environment characterized by mounting taxation on imports, a devaluing Kenya shilling against the US dollar, and the growing expense of borrowing.

Kenyan consumers have been grappling with high inflation rates and largely stagnant earnings, which have collectively eroded their purchasing power.

The auto industry has faced a slew of challenges this year, including shortages of certain vehicle models, rising interest rates for customers financed by banks, and accumulated pending bills yet to be settled by the government.

The economic landscape, marred by a weakening shilling and inflationary pressures, has forced consumers to make tough choices regarding new vehicle purchases.