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New car sales down 17pc YoY in February  

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By Steve UMIDHA

Car sales in Kenya fell by 17 percent Year–on–Year in February, a lobbyist for the formal motor sector said Monday, as the industry’s difficulties under the weight of supply problems from the Russian invasion of Ukraine continue into 2023.

Figures by Kenya Motor Industry Association (KMIA) show that the industry sold a total of 1,689 units by end of February, 295 units less than it managed in a similar period last year.

The association attributed the low retail sales numbers to a difficult two-month 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.

Retail sales of new vehicles also fell by 22.5 percent to 793 units in the first month of the year from 1,023 units sold in the same period last year, in what has been a worrying start to 2023.

But industry experts are voicing buoyancy 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 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,” Managing Director of CFAO Motors – formerly Toyota Kenya Ltd, Arvinder Reel in a telephone interview with this writer.

Macroeconomic indicators like the 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.

That is what Mr. Dinesh Kotecha – the CEO of auto dealer Simba Corporation expects to happen in the second quarter (Q2) of the year when fiscal cogency is anticipated.

The weakening of the shilling against the US dollar has put further strain on the cost of imported commodities as shipping lines increase ferrying expenses. That waning trend wheeled at Sh131.55 against the dollar Monday morning.

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) accelerated to 9.2 percent last month from 9.0 percent in January, above market forecasts of 8.8 percent and the central bank’s preferred range of 2.5 percent to 7.5 percent, according to the Kenya National Bureau of Statistics (KNBS).

Dollar impact on used cars

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.

President William Ruto last week, however, stated that the Government had taken measures to ensure dollar availability in the near future. “For the people who work numbers, I am giving you free advice that those of you who are hoarding dollars, you shortly might go into losses,” warned Ruto.

Adding, “I want to assure those in Kenya who are facing challenges of access to dollars that we have taken steps to ensure dollar availability in the next couple of weeks,” stated Ruto, hitting at forex traders some of whom have been fingered for hoarding the dollars.

 

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