Kenya’s New vehicle sales for March in a 14pc slim dip

By Steve UMIDHA

The Kenyan auto industry just posted another slump in local sales, but that’s not necessarily a bad sign for the sector.

Figures by Kenya Motor Industry Association (KMIA) show car sales fell by 14 per cent year–on–year in March 2023.

The industry sold a total of 2,758 units by the end of last month, 445 units less than it managed in a similar period last year.

The association attributed the low retail sales numbers to a difficult quarter borne from the brunt of an uncertain economic environment, sending ripples through the auto sector, which has largely dodged a significant hit from inflation this year in comparison to other sectors.

Similarly, economists still feel the slackened economic growth has everything to do with the lingering war in Europe which broke in February 2022, that has caused supply chain bottlenecks and driving up costs for everything from labor to raw materials.

A range of analytical approaches suggest that business investment has been subdued partly due to the effects of Russia’s invasion of Ukraine among other factors like political fights in the form of protests, whose outcomes have reduced the size of the economy and future growth.

The month of March for instance saw a countrywide anti-government protests by the Opposition whose bearing upset business operations largely in Nairobi and its environs, in what private sector body – Kenya Private sector Alliance (Kepsa) said negatively troubled ‘key moving parts of the economy.’

“Kenya is well-positioned to benefit from the global economic recovery, and the threats and interruption of law and order are a risk to sustained economic development,” urged Kepsa in a notice at the time.

But car industry experts are optimistic despite the low numbers and are confident that the situation will mend on political stability, availability of credit by banks, and other financial institutions, as well as improving economic macro indicators.

“We are expecting the market to grow by 15 per cent 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,” Managing Director of CFAO Motors – formerly Toyota Kenya Ltd, Arvinder Reel said in a telephone interview with this writer last month.

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.

Because Kenya’s oil and fuel importers use US dollars to buy fuel, the forex shortage has had a direct impact on the country’s fuel supplies, and by extension, the country’s supply chain. But it has also impacted essential imports such as medicine and food as well as car parts.

Also adding to the pain for would-be new car owners, is the country’s growing appetite to over burden its citizens with high taxes.

Kenya continues to choke its SMEs with ever-increasing tax increases as measures approved in the 2022 Finance Act a host of which kicked in January, adding to the pain of inflation that has pushed up the cost of living to a five-year high.