A currency dealer counts Kenya shillings at a money exchange counter in Nairobi. The weakening shilling has cut used car orders by 20 per cent in the eight months to August, taking the reality of currency woes to the doorsteps of auto dealers.
The weakening shilling has cut used car orders by 20 per cent in the eight months to August, taking the reality of currency woes to the doorsteps of auto dealers.
Kenya National Bureau of Statistics data shows that sales of used cars stood at 33,073 units in the eight months to August compared to 39,790 sold in the same period a year earlier.
Dealers said the rising cost of used cars — which have risen by more than 30 per cent since the year began — has affected orders with rising inflation depressing purchasing power.
“The order book for most dealers has been thin and potential buyers are adopting a wait and see attitude hoping that prices will fall,” said Antony Mwaura, a dealer in second hand cars at Hilltop Junction Motors.
“We used to sell 20 to 30 cars a month last year but currently we are selling about 10 to 15.”
The weak shilling against the Japanese yen and the dollar together with rising freight charges have seen the cost of imported cars rise by an average of 30 per cent this year compared to last year.
The shilling is trading at about Sh100 to the dollar, up from Sh80.70 in January while the Japanese Yen is averaging Sh132 from Sh99.40 at the start of the year.
The Central Bank of Kenya expects the unit to remain volatile over the next six months, a signal that the rising prices of cars is unlikely to cool in the short term.
For instance, a 1,800cc Toyota Premio now retails at Sh1.45 million up from Sh1.1 million in January.
Besides cars, the cost of a host of imported commodities including medicines, machinery, and electronics has risen by about 25 per cent due to the weakening shilling.
The trend is unfolding at a time when high prices of basic commodities such as food, energy, and transport have pushed up inflation from 5.42 per cent in January to 17.32 per cent last month.
This has seen most consumers spend the bulk of their incomes on household items, leaving them with little cash for luxury items like cars and holiday.
“Finances are too tight and people are vulnerable even to monthly cycles of cash flow,” said Mr Kwame Owino, the chief executive of the Institute of Economic Affairs, a local policy think-tank. He said that high inflation had also affected the middle-class who tend to be heavy buyers of used cars.
But high-end consumers and firms, the main consumers of new cars, have not cut their orders. Dealers in new vehicles grew their sales from 7,431 to 8,285 in the eight months, according to the Kenya Motor Industry Association (KMI).
“Our orders have been higher than last year and we expect a strong year,” said Rita Kavashe, managing director of General Motors East Africa.
But the story is different in the used car market segment where dealers said buyers were holding back on the hope that prices would drop when the shilling strengthens.
