Kenya’s new car market braces for tough period as June sales slump

By Steve Umidha

Auto industry is showing the greatest signs of strain in as many months amid a surprise decline in June car sales, as the service sector struggles to shake off inflationary burdens from the Russian invasion of Ukraine.

Latest statistics by the Kenya Motor Industry Association (KMI), the sector’s lobbyist, show that only 779 vehicles were sold last month – the lowest monthly sales in a single month in over three years.

By contrast, auto dealers sold 1,121 total units in a similar month last year, in what has been a careful ‘work in progress’ by car makers to adjust to consumers’ newly formed purchase patterns and priorities that were first stirred by Covid.

Activities in the automobile market were expected to fend off such concerns following an impressive start to the year, but June returned the worst month yet for the sector in what players now see as the start of the worst period ahead for the industry.

“There has been a supply chain problem for several weeks now and that can explain the low monthly sales in June. To tell you the truth, this is the beginning of a tough period for the sector as the month of July will be the same and August will probably be the worst,” offered Dinesh Kotecha, the Group CEO of Simba Corporation.

The surprise June slump, according to him, had also occasioned liquidity challenges which has seen several banks drag their feet in extending favorable financing options to car buyers.

Typically, car dealers eye the months of March, July, September, and December to offer discounts in order to get sales across the line, but such tendencies have been hindered as the country enters the final stretch of the election season where uncontrolled political spending affects money supply.

Cash circulation has been a major concern not only for car dealers but also the business community as well with election-related spending surprisingly low in this electioneering year.

The mood by automakers is a 360 turn of thoughts after some dealers in May openly said they were less worried about the upcoming August 9 general elections – a period that is synonymous with low economic activities.

Arvinder Reel, the managing director of CFAO Automotive Kenya – formally, Toyota Kenya in an interview last month, for example, held that the increased demand for showroom vehicles particularly the commercial class which includes trucks and pick-ups, which had been solid since January, would continue even after July.

For several months until now, KMIA figures had indicated a steady market, which was widely backed by sector observers largely due to the improved economic activities since the lifting of all movement restrictions by the government in July last year – a key decision that backed the improved performances seen in the first five months of the year.

The latest data further shows that overall sales in six months to June hit 6, 492 with the next two months believed to be the toughest period for the industry because of rising inflation and next month’s elections, which will ultimately slowdown economic growth.