Companies

Police tender helps Toyota to drive up market share

TOYOTA

A Toyota Kenya showroom on Uhuru Highway, Nairobi. A police leasing contract is aiding Toyota Kenya sales. Photo/FILE

Toyota Kenya opened up a huge market lead ahead of its top rival General Motors East Africa (GMEA) in the first quarter, helped by a large leasing contract from the National Police Service.

Data from the Kenya Motor Industry Association shows Toyota sold 1,459 units in the first three months, earning it a 34 per cent market share in the period compared to 24 per cent the whole of last year.

This saw it overtake GMEA, which sold 970 units in the quarter, giving it a 23 per cent market, down from 27 per cent in the entire 2013.

READ: Governors rev up new car sales 50pc in first quarter

Toyota and GMEA have been locked in a battle for supremacy in the new vehicles’ market since GMEA first grabbed market leadership from Toyota in 2010, with the two rivals regularly unseating each other.

The large gain by Toyota has been attributed to its securing of a Sh3 billion tender in September to supply the police with 1,100 vehicles.

READ: Toyota Kenya wins Sh3bn police deal amid rivals’ protests

“The contract has helped our sales. The deliveries started late last year and are going on,” a sales executive at Toyota Kenya told the Business Daily. Toyota’s first quarter performance is seen as a signal of the contract’s impact, with the deal set to boost the firm’s market in the coming months.

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

Rival dealers were not happy with the Treasury’s award of the tender to Toyota and unsuccessfully appealed to the Public Procurement and Oversight Authority (PPOA) to overturn the decision.

Leasing allows a client to use a vehicle for a fixed period of time which could run up to five years while paying monthly fees as the dealer takes care of maintenance.

This helps users of the leased cars to avoid the upfront capital expenditure they would otherwise incur if they opted to buy the vehicles.

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

Besides the police tender, Toyota gained from its diversification into the commercial truck and bus business last year through the Hino brand.

The firm—which has mostly relied heavily on saloon car and pick-up sales— sold 233 units of Hino bus and trucks in the first quarter. This was a 55.3 per cent increase from the 150 Hino units it sold in the whole of last year.

Toyota and GMEA captured most of the increased demand for new vehicles in the first quarter when overall unit sales jumped 52 per cent to 4,287 units compared to 2,816 in the same period last year.

Other dealers also lost market share in the first quarter compared to the 2013 rankings with the exception of Simba Corporation (12 per cent last year, 17 quarter one) and CMC Holdings—whose market share increased to eight per cent from seven per cent.

CMC is now controlled by Dubai-based Al Futtaim Group that recently paid the auto dealer’s shareholders Sh7.5 billion, effectively delisting it from the Nairobi Securities Exchange.

[email protected]