Kenya’s new auto sales slip in January on slim inventory, higher prices

By Steve Umidha 

Kenya’s auto retail sales dipped in January as reduced manufacturing due to the disruptive war in Ukraine, supply chain constraints, and global inflation triggered price hikes amid high demand, new industry data shows.

Retail sales of new vehicles fell by 22.5 percent to 793 units in the month under review from 1,023 units in a similar period last year, according to Kenya Motor Industry Association (KMIA), a lobbyist for the formal motor sector.

The association attributed the low numbers to a difficult month occasioned by supply problems from the Russian invasion of Ukraine and the general financial hardship being experienced by the majority of Kenyans.

The lingering war in Europe broke in February 2022 causing bottlenecks in supply chains, and driving up costs for everything from labor to raw materials, with key sectors like the automotive industry bearing the brunt of those contests.

Kenyans are still grappling with sky inflation in the middle of a sluggish economy with reduced cash flow circulation that has forced many workers to cut demand for non-essential items like vehicles.

Indeed, inflationary concerns dominated the airwaves for larger parts of last year, rising to a fever pitch in October 2022 when the overall inflation rate reached 9.6 percent, before cooling off in November.

But Managing Director of CFAO Motors – formerly Toyota Kenya Ltd, Arvinder Reel is confident that the New Year could be different, betting on political stability, availability of credit, and logistical improvements whose impacts he said, are already felt.

“We are expecting the market to grow by 15 percent this year. However, challenges still linger such as the exchange rate depreciation as well as production constraints which are low, but we are optimistic for the year,” he said in a recent telephone interview.

Expected higher spending from buyers and ease of the economic disruption of coronavirus restrictions as well as cheaper financing options by the banks were all mentioned as reasons for this year’s growth projection.

That optimism, Reel said, was being supported by easing inflation, a measure of the cost of living over the last 12 months which slowed to 9.1 percent in December from 9.5 percent a month earlier.

The drop in the months of November and December last year signaled a spark of easing in the cost of living crisis, which hit the highest levels in nearly five and a half years on soaring food and energy prices – impacting key sectors like manufacturing.

Supply chain glitches such as hip shortage pushed car prices higher last year, making it hard for automakers to meet demand due to delivery delays and a shortage of many new makes and models.

As a result, many consumers, keen on freshly-minted vehicles, remained unsurprisingly scarce and stayed away from showrooms.

That has meant more Kenyan buyers turning to used cars with demand pressures pushing up second-hand vehicle prices at extraordinary rates.

The weakening of the shilling against the dollar has also put further strain on the cost of imported commodities as shipping lines increase ferrying expenses. The weakening shilling yesterday continued its falling streak at Sh126.50 against the US dollar yesterday. On Tuesday the Shilling sold at Sh126.10 against the dollar.

Kenya’s currency fell the most in seven years and its benchmark stock index became Africa’s worst performer in 2022 after Russia’s war in Ukraine raised import costs and fueled inflation.

The overall year-on-year inflation rate as measured by the Consumer Price Index (CPI) was 9.0 percent, in January 2023, according to data from the Kenya National Bureau of Statistics (KNBS).

The rise in inflation was largely due to an increase in prices of commodities like housing water and food as well as non-alcoholic beverages.