New vehicle sales drop to 11-year low

Sales of new motor vehicles in April dropped to more than an 11-year low amid major contraction of economic activities due to the Covid-19 pandemic, setting up the industry for its worst year in recent history.

Data from the Kenya Motor Industry Association (KMI) shows that the formal dealers including Isuzu East Africa and Toyota Kenya sold a total of 594 units in April.

This is down 47.2 percent compared to 1,127 units in the same month last year, reflecting the impact of the coronavirus disruption which was first confirmed in the country on March 12.

The April slump was enough to pull sales in the first four months of the year down 16 percent to 3,292 units compared to 3,923 units a year earlier.

Before coronavirus, April sales had ranged between lows of 808 units and highs of 1,442 units since 2009.

The KMI statistics shows that tens of vehicle models registered zero sales in April this year while the major brands including Isuzu, Toyota and Mitsubishi suffered reduction in orders of up to 61.5 percent.

Luxury brands such as Bentley and Porsche are among the hardest hit, reporting no sales last month.

Ms Rita Kavashe, the CEO of Isuzu East Africa, recently told the Business Daily that the formal dealers were bracing themselves for a sales slump of up to 30 percent this year.

Unit sales of Isuzu commercial vehicles fell by the largest margin of 61.5 percent among the major dealers to 179 in April compared to 466 in the same month last year.

Those of Toyota models dropped 38.4 percent to 176 from 286 over same the period while Mitsubishi’s contracted 51 percent to 71 from 145.

The performance reflects the impact of the general business disruption brought by the pandemic besides travel restrictions that have specifically hurt the transport sector.

Players in the industry say banks have reduced their financing of vehicles to protect their balance sheets from rising defaults.

Banks are currently willing to finance vehicle purchases by sectors deemed by the government as offering essential services such as healthcare, Ms Kavashe said.

The travel restrictions has also hurt earnings of cargo transporters and public service operators and left them with excess capacity, reducing their need to expand their fleets.

The sharp contraction in the new motor vehicle industry is set to hit tax revenues besides risking job losses.

DT Dobie, for instance, has announced plans to retrench a portion of its workforce though it says the decision was informed by sales decline predating the pandemic.

Kenya Revenue Authority (KRA) collects billions of shillings from motor vehicle sales through a plethora of taxes including import duty, excise duty, VAT and Railway Development Levy.

The new vehicle dealers, like most businesses, are pegging their recovery on discovery of a vaccine or a cure for Covid-19 that will enable full reopening of the local and global economy.