Companies

Auto dealers in race to supply Sh6bn police vehicles

car lease

New motor vehicle dealers are set to battle for a Sh6 billion leasing contract to supply the police with 2,700 utility and saloon cars. Photo/FILE

New motor vehicle dealers are set to battle for a Sh6 billion leasing contract to supply the police with 2,700 utility and saloon cars.

The Treasury Tuesday invited bids from firms like Toyota Kenya, General Motors East Africa (GMEA), CMC Holdings, DT Dobie and Simba Corporation.

“The National Treasury invites sealed tenders from original motor vehicles manufacturers, motor vehicle dealers … and interested firms for provision of vehicles and transport services for the national police service through leasing,” reads the Press notice.

The new leasing contract signals the government’s shift from direct purchase of vehicles, a trend that has raised the stakes for firms that rely heavily on State orders.

READ: Car dealers gear up for windfall in lease plan

The government, which accounts for a quarter of all new vehicle sales, previously bought cars, vans, buses and trucks from multiple dealers but this has changed with leasing from a single supplier.

The 2,700 units, announced by Treasury secretary Henry Rotich in his budget speech, represent 18.5 per cent of the total 14,542 new vehicles sold in the country last year.

The government is set to spend a total of Sh6.7 billion to lease vehicles and aircraft for the police in a bid to counter rising insecurity.

READ: Sh6.7bn earmarked for aircraft, police car leases

Leasing allows a client to use a vehicle for a fixed period, which could run up to five years while paying monthly fees as the dealer takes care of maintenance. This helps users of the leased vehicles to avoid the upfront huge capital expenditure they would otherwise incur if they opted to buy.

The government is implementing a multi-billion-shilling motor vehicle lease plan, which was mooted in 2010, to help cut transport costs.

Mr Rotich said the government would spend Sh3 billion annually on leasing 1,200 vehicles for the police service, a plan that will become a key driver of car demand in the medium term.

Toyota Kenya, for instance, recently won a tender to lease 1,100 cars to the police in a deal that was estimated at Sh3 billion amid protests from rival firms.

The Treasury tapped the Japanese auto firm among 14 car dealers in a move that looks set to boost Toyota’s market share which stood at 24 per cent last year.

Its rivals were not happy with the award and Associated Motors, an affiliate of General Motors, unsuccessfully appealed to the Public Procurement and Oversight Authority to overturn the decision.

The 1,100 units represent about 10 per cent of total annual sales of new vehicles in Kenya, explaining the fierce fight among car dealers to win the contract.