Motorcycle and tuktuks sales in Kenya have been greatly affected by a shortage of foreign exchange reserves and surging inflation, according to a leading dealer Car and General.
According to the firm's CEO Vijay Gidoomal, the biting inflation reduced the demand for two wheelers (motorbikes) by 50 percent in three months.
Gidoomall said the current tough economic environment, global inflation and reduced foreign exchange reserves has made it difficult businesses to shake off the 2022 shocks.
“In 2022 we saw a devaluation of the Kenyan shilling to December but now the reality is we see there will be a little more stability in 2023,” said Vijay.
He added that the unavailability of the dollar in the market made it hard for the country to hedge, further spiking the shortage and hitting businesses.
Currency hedging, is where a company makes a “forward agreement” with an investment dealer to sell a specific amount of a particular currency on a future date—but at today's exchange rate.
“Hedging is the only way we can reduce devaluation of the shilling now. One of the reasons we couldn’t hedge was because of scarcity, what we are hopping is that if there is some stability people will release the dollars that they are holding,” added Vijay.
From June to August last year the Car and General says its entire business recorded low performance with its net profit for the financial year ended September 2022 dropping by 23 percent to Sh679.46 million.
The firm, which deals in a range of power generation, engineering and automotive products, motorcycles and tuk-tuks (three-wheelers), says the drop in profit was due to Sh301 million foreign exchange losses and Sh139 million demurrage costs linked to logistical issues.
The Russia-Ukraine war and the August general election, saw sales in Kenya drop by five percent while those outside the country increased by 48 percent.
Uganda and Tanzania accounted for 45 percent of group sales.
The CEO noted that with the prevailing economic and business environment, most businesses are finding it challenging to pursue their strategic objectives.
With the country rising to adopt e-mobility Car and General says it expects its electric three wheelers to hit the Kenyan market between April and June.
“Uptake of three wheelers is small in Nairobi because of regulatory restrictions. The coast region's opportunity for three wheeler EVs is huge,” said Vijay