Car dealers build stocks as cheaper loans boost demand

• Kenya National Bureau of Statistics (KNBS) data shows that 1,562 saloon cars were registered in June compared to 799 units in May, while new station wagon registrations doubled to 5,045 compared to 2,573 units in May.
• Car dealers, however, said that sales were sluggish, indicating a bullish outlook by sellers who were expecting to benefit from falling cost, credit, and inflation rates.
• Weakening of the shilling saw the price of imports, including vehicles, shoot up, dampening appetite for new cars. Interest rates rose to a high of 30 per cent leading to a slow down in credit uptake which is the main driver of demand for vehicles.
• Car sales dropped by 20 per cent in the second half of last year. Vehicle prices have dropped marginally with the stabilisation of the shilling.

New personal car registration jumped by 95.9 per cent in June compared to units recorded in May, in what dealers attributed to a build-up of stocks in anticipation of higher demand.

Kenya National Bureau of Statistics (KNBS) data shows that 1,562 saloon cars were registered in June compared to 799 units in May, while new station wagon registrations doubled to 5,045 compared to 2,573 units in May.

Car dealers, however, said that sales were sluggish, indicating a bullish outlook by sellers who were expecting to benefit from falling cost, credit, and inflation rates.

“Registration is high, but sales do not match; like now the KBS (registration) series is over but the sales are not that good,” said Kenya Auto Bazaar Association chairman Charles Munyori.

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He said bulk importers were bringing in stocks anticipating higher demand as interest rates fall.

Some of the bulk importers are based in Japan and the United Arab Emirates and include Jans Trading Company, Yuasa Motors Ltd, Alibaba, and SBT Japan.

“They usually import in bulk, store them in Mombasa in anticipation of higher demand,” said Mr Munyori.

Mr Robert Marete, a sales manager at Tshusho Capital which offers financing to customers of Toyota’s used cars, said that with the fall of interest rates sales had improved and were expected to continue growing.

“The (falling) interest rates could attract people to seek financing to buy,” said Mr Marete.

A sharp rise in the inflation rate and depreciation of the shilling last year prompted the Central Bank of Kenya to increase the cost of money in a bid to reduce demand and prop up the shilling.

Weakening of the shilling saw the price of imports, including vehicles, shoot up, dampening appetite for new cars. Interest rates rose to a high of 30 per cent leading to a slow down in credit uptake which is the main driver of demand for vehicles.

Car sales dropped by 20 per cent in the second half of last year. Vehicle prices have dropped marginally with the stabilisation of the shilling.

A second hand Toyota NZE with a capacity of 1500cc that was costing approximately Sh1.2 million earlier in the year is now trading at about Sh950,000, Mr Munyori said.

Sales of new luxury cars grew by 17 per cent in the first half of 2012, beating the downturn in that market segment, thanks to high demand from companies and wealthy individuals.