New luxury car sales drop 32pc on high cost of loans

Sales of new luxury cars in Kenya dropped 32 per cent in the first quarter, mirroring the overall downturn in the new vehicles market hit, especially by high cost of loans.

Data from the Kenya Motor Industry Association (KMI) shows that sales of high-end cars such as Mercedes and Jaguars stood at 64 units in the period compared to 94 units a year earlier.

Total sales in the new vehicle market dropped 11.4 per cent to 3,807 units in the same period, with luxury car dealers taking a harder hit as wealthy individuals and private firms cut orders.

“The drop in demand is due to high interest rates and tighter credit policies by banks.

“Individuals and firms are also downsizing and buying luxury cars is not a priority,” said a dealer who did not wish to be named.

Banks raised interest rates of up to 24 per cent in the first quarter compared to 16 per cent a year earlier on shilling-denominated loans.

Interest on euro and dollar denominated loans also went up from an average of seven per cent to touch highs of 11 per cent in a similar period.

Besides the high interest rates, demand for new vehicles has been hit by the weakening of the shilling and more stringent credit policies by banks.

The local currency, for instance, depreciated nine per cent to trade at an average of 101 units to the dollar in the review period compared to 91 units the year before.

This has made new vehicles — which are priced in hard currencies — more expensive in shilling terms.

READ: New vehicle sales fall 11.4pc on high cost of bank loans

All the luxury car dealers recorded a drop in sales except RMA Kenya whose total sales of Jaguar and Land Rover brands remained unchanged at 26 units.

“We did not lower our prices. We have worked hard to build our brand appeal,” said Sanjiv Shah, RMA chief executive.

“Our cars remain among the most expensive in the market but the rich know what they want and price is not a big factor.”

Land Rover brands including Discovery and Range Rovers remained the fastest-selling in the first quarter, moving 23 units compared to 25 units the year before.

Most of the Land Rover sales came from RMA Kenya which in 2013 took over the Jaguar Land Rover franchise from CMC Holdings that is clearing its stocks.

RMA sold its first Range Rover Autobiography, arguably the most expensive car in local showrooms, in the first quarter.

The price of the highly customisable car, featuring massage seats and a champagne cooler, starts from Sh30 million and can top the Sh40 million mark depending on extra options.

Sales of Mercedes and Porsche were tied at 15 units in the review period. Porsche sales, by Porsche Centre Nairobi, were up from 13 units in last year’s first quarter while Mercedes sales (DT Dobie) were down from 22 units.

Simba Corporation saw its sales of BMWs drop to five units from 14 units while sales of Jeep Grand Cherokee, also by DT Dobie, fell to one unit from 17 units. Jaguar sales rose to five units from three units.

The rivals continue to launch new models, competing on pricing and brand reputation to grow sales.

DT Dobie, for instance, has introduced six new Mercedes models in the SUV category where it previously didn’t have a strong presence.