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Kenya’s new auto sales decline 15 percent in 7 months to July

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By Steve UMIDHA

New vehicle sales in Kenya tumbled 15 percent in seven months to July, latest sector data shows, as the industry’s difficulties under the weight of a global inflation continue into the second half of the year.

Auto firms led by Isuzu East Africa, CFAO Group – formerly Toyota Kenya and Simba Corporation (Simba Motors), among other players reported combined sales totaled 6,636 units in the review period compared to 7,798 units sold from year – earlier figures, meaning vehicle manufacturers sold 1,162 units fewer during that period.

Data by the Kenya Motor Industry Association (KMIA) further shows that on a month – to – month basis, the demand for showroom vehicles has been falling with local players selling just 144 units including those assembled locally in July alone.

In contrast, the industry sold 1,910 units in the same month last year.

The latest industry performance further goes against an earlier prediction by Fitch Solutions – a data analytic firm which suggested that the sector would grow by 6.7 percent this year on growing economic activity and reduced uncertainty following the country’s presidential elections in August 2022.

“We hold an upbeat outlook for Kenya’s auto market in 2023. In terms of the commercial vehicle (CV) segment, we expect y-o-y growth to expand 7.9 percent in 2023 to 18,700 units, after an estimated 17.5 percent growth in 2022.

Our upbeat near-term outlook for CV sales is driven by our expectation that light-commercial vehicle sales will increase by 11.0 percent y-o-y,” noted the firm in February.

Industry executives have in recent months attributed the low retail sales numbers to a difficult period in which the sector has borne the brunt of the lingering European war which broke in February 2022, causing supply chain bottlenecks and driving up costs for everything from labor to raw materials.

Similarly, Kenya’s new tax package – a host of which were back-dated to July 1, have loosen the local labor market, with employers in many sectors confronting a truly tight equilibrium for the first time in decades and face the prospect of salaried employees’ ability to spend on luxury condensed by tough economic times.

Other factors such as unpaid or pending bills by the National and County Governments have sapped Kenyan auto sales and a recovery will likely be slow, threatening auto workers whose jobs depend on fleet sales.

And even as auto dealers continue to negotiate with both national and county governments over unpaid or pending bills which have sapped their sales, the sector’s recovery will likely be slow, threatening auto workers whose jobs depend on fleet sales.

In a recent telephone interview Dinesh Kotecha, the Group CEO of Simba Corporation – sellers of Proton vehicle brands, Mitsubishi, Fuso, Mahindra, and Same Tractors, had little faith left in the sector’s recovery.

“This year is gone,” decrying the mounting worry in the form of pending bills and high interest rates as the most pressing and lingering holdups likely to see the industry perform dismally this year.

His counterpart, Arvinder Reel, the Managing Director of CFAO Group which sells Toyota vehicles and Hino trucks, shared similar worries but was “hoping to do at least what we did last year.”

Currency fluctuations and wobbly interest rates also remain a big threat to the sector’s survival this year.

Typically, a slump in auto sales typically falls, often significantly and many buyers tend to back out of the market until the economy recovers.

In the short term, both agree that fleet sales are not a major concern for automakers who are now focused on ramping up production to beef up lackluster dealer inventories which has existed since the onset of Covid-19.

Figures by the Controller of Budget (CoB), Margaret Nyakango shows that National and County Governments’ unpaid bills stood at Sh637.91 billion as of February 2023.

As of December, last year, ministries had pending bills of 80.2 billion, State co-operations or parastatals had pending bills worth 400.6 billion, while counties had 157.91 worth of pending bills.

This story first appeared on PEOPLE DAILY

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