Businesses & Financial News

October lights up car sales to over 10,000 units

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By Remie Otieno

New vehicle sales remained strong in October, with the Kenya Motor Industry Association (KMIA) reporting 1,117 new units sold during the month, bringing year-to-date (YTD) total sales to 11,045 for 2022, and surpassing the 10,000 mark for the first time.

August auto sales almost flat on slim inventories

The easing of supply chain bottlenecks was attributed to the improved sales, albeit marginal, coming on the back of August 9 general elections which had contributed to low sales months earlier.

Consumers’ preference for SUV and light commercial vehicles has continued to grow, making up a chunk of total cars sold over the year, with the likes of Simba Corporation unveiling the PROTON X70, the flagship model of the Proton brand in the Kenyan market this month, pointing to a growing appetite for the SUV segment.

Automakers joyride to continue on solid supplies

The PROTON X70 is a luxury SUV produced by the Malaysian car maker PROTON.

“We started this journey two years ago with the assembly of the Proton SAGA at our AVA facility in Mombasa. The local assembly of Proton SAGA has helped us to introduce the Proton brand into the Kenyan market,” commented Dinesh Kotecha, CEO of Simba Corporation during the launch, projecting a “better than expected year” for auto dealers.

Top banks are offering ‘green’ auto loans

Typically, the months of September, October and December tend to see car manufactures extend discounts to get sales across the line, but with the Central Bank of Kenya aggressively hiking interest rates recently to fight inflation, consumers could in the coming months find the cost of financing a new car suddenly a lot higher than it was previously.

In return, that could cut the demand and add new pressure to the auto industry, which had been struggling with depleted inventories during the pandemic even before the European war broke in February.

The country’s annual inflation accelerated for the eighth straight month to 9.6 percent in October of 2022, from 9.2 percent in September and above market forecasts of 9.5 percent. It was the steepest inflation rate since May of 2017, breaching the upper limit of the central bank’s target range of 2.5%-7.5% for the fifth month.

The increase came even as the Central Bank of Kenya (CBK) raised the key lending rate by 75 basis points to 8.25 percent, matching the Federal Reserve hike in September as central banks struggle to tame inflation.

Activity in the country’s services sector increased at a marginal pace in October, according to business executives responding to a Service Sector Outlook Survey.

The revenue index by Stanbic Bank Kenya Purchasing Managers Index (PMI) – a key measure of the private sector conditions, posted 50.2 to signal only a fractional improvement in operating conditions in the period under review.

Last month’s index was down from a seven-month high of 51.7 the sector posted in September, when renewed growth was indicated due to the end of the national election period. September’s reading posted 51.7 during the month, up sharply from 44.2 in August and above the 50.0 no-change mark for the first time since March this year.

Labor market indicators suggested a continued but cautious employment growth and longer workweeks in October – a synonymous period for seasonal hiring.

“New orders, employment and purchasing growth recorded weaker expansions. Bar manufacturing output contracted slightly for the seventh time in eight months. However, the 12-month output outlook improved to 15-month high,” noted Mulalo Madula, an economist at Standard Bank.

The reading signaled a renewed and modest improvement in overall business conditions, with the end of the elections cited by survey panelists as being a key factor in driving that growth.

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