Full-Year new car sales for 2023 fell by 12% on sluggish economic growth – KMIA

By Steve UMIDHA

Some 11,769 new cars reached the road during 2023 – a decrease of 12 percent for full year 2022, according to the latest figures from the Kenya Motor Industry Association (KMIA).

It means auto players in the sector sold 1,583 less than they managed a year earlier when the industry reported total new vehicle sales of 13,352 units.

The Kenya Motor Industry Association (KMIA) attributed the low retail sales numbers to a difficult year borne from the brunt of an uncertain economic environment, sending ripples through the auto sector, which has largely dodged a significant hit from higher inflation numbers during the year in comparison to other sectors.

Also read: Kenya’s new vehicle sales reflect pressures of current market conditions

Macroeconomic indicators like the gross domestic product (GDP) – a monetary measure of the market value of all the final goods and services produced and sold in a specific time period, are statistics or data readings that reflect the economic circumstances of a country or sector.

They are used by analysts and governments to assess the current and future health of the economy and financial markets. Other factors like interest rates, unemployment rates, disposable income, and exchange rates ordinarily affect the growth and performance of the automotive industry.

And so, during a slump, auto sales typically fall, often significantly and many buyers tend to back out of the market until the economy recovers – a kin to the trend seen today.

Similar challenges have also been seen in prices of used vehicles or second-hand cars commonly known as ‘mitumba’ with popular brands like Vitz, and Subaru among other models all increasing prices by hundreds of thousands of shillings on scarcity and weakening the local currency.

In fact, just today, a number of Kenyan executives have expressed concerns over this year’s growth prospects.

Read: Kenya’s Q1 new vehicle sales impress

According to the latest CEO Survey by PwC East Africa, despite these issues topping their worry list, 26 percent of the 231 CEOs who took part in the study believe growth will improve in the next 12 months, which is lower compared to the 33 per cent who took part in 2023 survey.

A host of them – 42 percent, say they are cautious about global economic growth, compared to 49 percent last year – with 35 percent of company CEOs listing financial constraint as one of the inhibiting factors to business growth this year.

The overall year on year inflation rate as measured by the Consumer Price Index (CPI) was 6.3 per cent, in February 2024. This means that in February 2024, the general price level was 6.3 per cent higher than that of February 2023.

That figure stood at 6.85 in January this year and 6.63 in December last year.