•While DT Dobie sold three Mercedes Benz from 11 previously, orders for BMWs and Range Rovers dropped to two and one from 10 and six, respectively.
•local sales of luxury vehicle brands such as BMW and Mercedes-Benz, among others, drop by 65.5 percent in the first quarter of 2023.
The rising cost of lending due to monetary tightening by the Central Bank and the high inflation has left Kenyans with little to splash in the luxury car market.
This is evident by industry trends where sales on luxury vehicle brands such as BMW and Mercedes-Benz, among others, drop by 65.5 per cent in the first quarter of 2023.
Latest data from the Kenya Motor Industry Association (KMIA) shows luxury cars sold by DT Dobie and Inchcape Kenya dropped to 11 from 29 during a similar period last year.
The KMIA is the leading federation of companies in Kenya’s formal motor sector, embracing distributors of all the major vehicle marques, vehicle assemblers, component manufacturers, equipment agents, parts suppliers and many ancillary services.
In the period between January to March 2023, dwindling order demands were hurt by factors such as high vehicle prices and rising interest rates.
“Sales in the entire formal vehicle industry dropped 13.9 per cent to 2,758 units in the review period,” Kenya Motor Industry Association said in a statement.
The slump in car sales comes at a time when the country’s shilling is depreciating against the US dollar, as well as the Central Bank of Kenya’s move to hike interest rates, which have made procuring loans more expensive.
The automobile sector has faced multiple challenges including the weakening of the shilling and dollar shortage, which prompted the dealers to raise prices in response.
While DT Dobie sold three Mercedes Benz from 11 previously, orders for BMWs and Range Rovers dropped to two and one from 10 and six, respectively.
The decline also extends to the total number of vehicles sold during the period with dealers only managing to sell 2,758 units, representing a 13.9 percent drop from the previous period.
A majority of cars bought locally are financed through bank loans, signalling why the tightening of monetary policies had a direct hit on sales.
High-end car vendors, whose prices can exceed Sh30 million, performed worse in the first quarter than the general new vehicle market with only Land Rover sales increasing from two to four units.
The dealers, which included Isuzu East Africa, Simba Corp, and Toyota East Africa, had sold 3,203 units in the previous quarter.
Simba Corp, whose brands include Proton and Mitsubishi, saw the greatest drop in sales among the top dealers, falling 26.8 per cent to 248.
Orders for Isuzu dropped 3.3 per cent to 1,174.
CFAO Motors (formerly Toyota Kenya) which deals in Hino and Toyota brands , defied the trend, increasing sales by 2.9 per cent to 793 units.
Last year, dealers in the country sold a total of 13,352 units down from 14,250 in 2021.
The biggest sale was in 2015 when they sold a total of 19,253 units.
This is a mere 15 per cent of the annual used-car imports which continue to be preferred by Kenyans, mainly on their affordability compared to new cars with zero milage.
Second-hand car imports are mainly from Japan (80 per cent), United Kingdom, United Arab Emirates, Singapore and South Africa.
Monthly imports range between 7,000 and 9,000 units, according to the Car Importers Association of Kenya (CIAK).
This can go up to 12,000 units in the last months of the year, when the unit prices begin to drop in the import source markets, and low taxes.
Former President Uhuru Kenyatta’s administration initiated efforts to build the local industry by supporting local assemblers and dealers, including tax reliefs, but Kenyans continued to prefer cheaper imports.
More than 80 per cent of vehicles on the Kenyan roads are imported used cars with the country bringing in more than 120,000 units annually.
The Kenya Kwanza administration has announced a policy shift that will soon see second-hand car dealers and individuals ship in vehicles and defer paying taxes for up to one year, a move that will encourage more imports.
Kenya Revenue Authority has been asked to allow the use of bonded warehouses for imported used vehicles, meaning dealers will be able to bring in units and have them parked at KRA customs-controlled premises for up to six months without payment of taxes, as they shop for buyers.