Vehicle registrations fell 17 percent in the eight months to August as costlier units due to a weak shilling against the dollar, supply crunch in source markets and rising shipping expenses, kept buyers away.
Data from the Kenya National Bureau of Statistics (KNBS) shows that 49,751 new and second-hand units were registered in the period to August compared to 60,006 in the same period last year.
This emerged in a period that saw used car prices in Kenya jump by up to 55 percent, pushing low-range types such as Vitz above the Sh1.2 million mark.
Popular 2015 Japanese models such as Toyota Harrier, Toyota Fielder and Toyota Premio and Nissan Sylphy rose by between Sh250,000 and Sh600,000, according to data from Kenya Auto Bazaar Association, which represents used car dealers.
Buyers cut orders and some shunned popular Toyota car models in favour of Nissan and Mazda brands due to the cost pain.
The price shock hit individuals and companies who buy vehicles using bank loans that cover vehicles that are less than eight years old and recover the debt within four years.
Kenyans are also grappling with sky-inflation in the middle of a sluggish economy that is yet to recover fully from effects of Covid-19 economic hardships and Russia’s war in Ukraine, forcing many workers to cut demand for non-essential items like cars.
“The drop is a combination of the weaker shilling and shortages in our main sources like Japan. Someone comes to you to make an order and when you quote the price, they just cancel because the difference is just too high,” Charles Munyori, secretary-general of Kenya Auto Bazaar, told the Business Daily.
Dealers faced increased competition from buyers in source markets such as Japan and the UK as automakers have scaled down production owing to shortages of semiconductors used in electronic devices.
Most buyers in the developed markets would typically buy new cars but have now resorted to second-hand models in response to shortages.
A global shortage of computer chips used in car production, as well as other materials such as copper, aluminium and cobalt, has led to fewer new vehicles rolling off production lines.
That has meant more buyers turning to used cars with demand pressures pushing up second-hand vehicle prices at unprecedented rates.
The weakening of the shilling against the dollar has put further strain on the cost of imported commodities as shipping lines increase ferrying expenses.
The shilling weakened from Sh112.37 against the dollar at the start of the year to Sh119.13 in August and Sh123.15 last week.
The KNBS data shows that registration of saloon cars and station wagons dropped 26 percent and 22 percent to 3,781 and 31,833 units, respectively in the review period compared to last year.
Registrations for trailers dropped by nearly half to 1,248 in the period under review from 2,317 while those for mini-buses fell 15.3 percent to 460 units.
Demand for new cars, especially luxury brands like BMW and Mercedes models, also dropped 22.2 percent in the eight months to August, hurting dealers including DT Dobie and Inchcape Kenya.
Sales of Mercedes shrunk to 33 from 43 but the German car models remained the top selling brand in the country. Mercedes cars are sold by DT Dobie. Orders for BMW followed, declining to 21 from 30.
Second-hand cars dominate the Kenyan market and supply shortages in source markets like Japan and the United Kingdom compounded by a weak shilling significantly hurts imports.
The price of a second-hand Toyota Prado shot up to Sh5.2 million from Sh4.4 million at the start of the year while RAV4 shot to Sh3 million from Sh2.2 million in a similar period.
Antony Aleri of CarMax East Africa — a dealer of used vehicles in the city — say importers reduced their second-hand car shipments for most of this year anticipating price stabilisation.
“Most dealers were hesitant to import vehicles or generally stocked with caution for fear of prices stabilising leaving them with relatively higher priced units,” said Mr Aleri.
“There was speculation of price normalisation after settling from the effects of the Covid-19 pandemic leading to others opting to wait and observe if the market would stabilise.”
Pre-election jitters ahead of the August 9 polls also led to a demand fall amid fears of economic disruptions and violence.
Second-hand cars dominate the local market with new units mainly bought by government agencies, learning institutions and wealthy Kenyans.
The data shows that registration for buses, pick-up trucks and lorries — mainly used for long distance transport, agriculture and construction sectors— are the only units that posted an increase in the review period.
Registration of buses rose 96 percent to 1,131 in the eight months to August from a similar period last year while those for pick-ups increased to 2,838 from 2,175, a 30 percent rise.
But the dealers said orders for second-hand units picked up from October fuelling optimism ahead of the New Year.
“We observed high turnover, especially during the final quarter of the year thus we are optimistic that the situation will improve after the smooth change of guard and activities getting back to normal,” added Mr Aleri.
Credit: Source link