New vehicle dealers have suffered a double-digit fall in half-year sales for the second year running, pointing to a tough operating environment characterised by high interest rates and taxation.
The firms including Isuzu East Africa, CFAO Mobility Kenya and Simba Corp reported a 12.27 percent drop in purchases to 4,982 units in six months ended June from 5,679 units a year earlier, according to data from Kenya Motor Industry Association (KMIA)
The orders had declined by a similar margin in the same period last year, contracting 12.52 percent from 6,492 in the first half-year period of 2021.
The double-digit fall for two years on a spin has pushed orders to the lowest levels since the Covid-19 pandemic year, when sales dipped by a quarter (25.48 percent) to 4,628 units from 6,210 units in the January-June 2019 period.
Dealers have this year complained of climbing interest rates which have depressed demand as most of purchases are funded by banks, while accumulating pending bills yet to be settled by the government and private firms have eroded their cash flow positions.
“Interest rates have been high, meaning most of our customers were not able to get funding,” Rita Kavashe, the managing director for Isuzu East Africa, said in an interview in March.
“We have not seen such an interest rate in many years and so it is tough for our customers too.”
The rising cost of borrowing, which has topped 26 percent, has added to past challenges of high exchange rates and difficulties in accessing dollars which the dealers battled in 2022 and last year, hitting importation of vehicles and spare parts.
The shilling hit a historic low of Sh161 against the US dollar in January, according to official rates published by Central Bank of Kenya, before regaining ground from mid-February to trade at prevailing rates of about 130 units to the greenback.
The shilling averaged 140.27 units against the dollar in the half-year period, 6.54 percent weaker than the average of 131.66 units in the same period in 2023.
The KMIA data shows that CFAO posted the largest fall amongst the three dealers.
The dealer, which sells multiple brands such as Toyota and Mercedes, posted a 14.48 percent year-on-year drop in sales to 1,630 units in the six-month period.
Market leader Isuzu said orders fell a marginal 5.95 percent to 2,354 units, while Simba Corp sales retreated 10.15 percent to 522 vehicles.
Isuzu —which sells pick-ups, buses, trucks and sport utility vehicles (SUVs)— increased its share of the market to 47.25 percent from 44.07 percent, while CFAO’s share fell to 32.72 percent from 33.56 percent.
The share of Simba Corp remained largely unchanged, edging up slightly to 10.48 percent from 10.23 percent.
