•The drop comes in the wake of a falling shilling which has lost up to 20 per cent of its value to the dollar, making imports costlier.
•This, coupled with the new 35 per cent import duty that came into place in July has seen prices of motor vehicles increase.
Image: Moses Mwangi
New motor vehicle sales for the nine months to September dropped 12.3 per cent compared to last year, industry data shows.
Latest data by the Kenya Motor Industry Association (KMIA) shows dealers in the country sold a total of 8,715 units between January and September, compared to 9,936 units sold during the same period last year.
These are vehicles sold from the showrooms at zero mileage where 16 major dealers are operating in the country.
The drop comes in the wake of a falling shilling, which has lost up to 20 per cent of its value to the dollar, making imports costlier.
This, coupled with the new 35 per cent import duty that came into place in July has pushed up car prices.
There has also been reported decreases in key sub-sectors of the economy among them construction, transport and manufacturing, which are huge markets for dealers with trucks forming the bulk of monthly sales.
According to latest data by the Kenya National Bureau of Statistics, the construction sector recorded a subdued growth of 2.6 per cent in the second quarter of 2023, compared to 4.5 per cent growth in the same period in 2022.
Manufacturing sector’s growth slowed to 1.5 per cent compared to 3.6 per cent growth while activities in the transportation and storage were also relatively slower, expanding by 3.0 per cent, down from 7.2 per cent.
Private sector sentiments captured in the monthly Purchasing Managers’ Index by Stanbic Bank Kenya, indicated negative feedback at the end of the third quarter, as firms saw a sharp contraction in new orders following a brief respite in August.
“Elevated inflationary pressures and rising fuel bills acted to dampen client sales, whilst also leading to the second-fastest rise in input costs in the survey's near-decade history,” Stanbic said.
Businesses responded by reducing their output levels solidly during September and made cuts to both employment and inventories for the first time in seven months.
At the start of the current financial year, Kenya adopted a 35 percent import duty, after the East African Community approved an application by the country to raise duty on motor vehicles.
This is under the Common External Tariff (CET), which has seen duty increase from a previous 25 per cent, pushing up prices of units by more than 10 per cent.
The nine-month sales are 4,637 units short of last year’s total sales of 13,352, meaning this year could have a decline unless dealers are able to sale at least 1,545 vehicles per month in the remaining period. The current average monthly sales are at about 1,100.
Meanwhile, trucks, pick-ups, station wagon and buses remained the most sought after new units in the market, preferred mostly by players in construction, transport, agriculture, manufacturing and retail sectors.
Dealers sold 3,681 trucks, single cabin pick-ups sold were 1,425, station wagons (1,039), double cabin pick-ups (897) while medium buses widely used in the public transport sector were 435.
Isuzu continued to dominate the market with a 45.3 per cent share, selling 3,946 units. Toyota East Africa followed with 2,376 units (27.3 per cent), while Simba Corp and Tata Africa had a share of 9.9 per cent and 4.8 per cent, respectively, selling 866 and 418 units each.
Kenyans however continue to prefer cheaper second-hand cars imports, which account for more than 80 per cent of the vehicles on the roads, with an average monthly import of about 7,000-8,000 units.
These numbers are expected to go up after Kenya Revenue Authority's decision to harmonise the valuation parameters of used motor vehicle units.
The taxman has shifted to a bloc year on taxation of second-hand cars, meaning units that arrive even as late as December are paying the same taxes as those imported in January, same year.
KRA was previously applying the first month of registration while other government agencies, among them Kebs, were applying full year.
This resulted in importers raising concerns especially where the documents presented do not have the date of first registration, KRA said, as it moved to effect the new rule on September 1.
According to the Car Importers Association of Kenya, the decision has encouraged importers to bring in units irrespective of the time of the year, a trend that is expected to stabilise the used-cars market.