Toyota Kenya has won a tender to lease 1,100 cars to the police in a deal estimated at Sh3 billion amid protests from rival firms.
The Treasury last month tapped the Japanese auto firm among 14 car dealers in a move that looks set to reverse the drop in Toyota’s market share, which in the six months to June dropped to its lowest level in eight years on reduced demand for new saloon cars.
Its rivals were not happy with the award as a result Associated Motors, an affiliate of General Motors, unsuccessfully appealed to the Public Procurement and Oversight Authority (PPOA) to overturn the decision.
The 1,100 units represent about 10 per cent of total annual sales of new vehicles in Kenya, explaining the fight among car dealers to win the contract.
“We won the leasing contract. Full details will be announced next week,” said Dennis Awori, the chairman of Toyota Kenya, in a phone interview Tuesday.
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 huge 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.
Treasury secretary Henry Rotich said the government would spend Sh3 billion annually on leasing 1, 200 vehicles for the police service, a plan that will form a key driver of car demand in the medium term.
Firms that lost out told the Business Daily that Treasury promised to expand the leasing plan after the dealers protested to PPOA over the exclusive award of the deal to Toyota. They argued that the tender should have been split in vehicle categories such as trucks, buses, and pick-ups to allow multiple players to win the bids.
The rival dealers also alleged that the vehicle specifications favoured Toyota’s brands such as the Land Cruiser. “Associated Motors was the only company that filed an appeal, but it was thrown out on November 1,” said an official at PPOA.
The award of the deal to Toyota is set to lift its sales in a market where the dealer lost the pole position to General Motors in 2010.
Data from the Kenya Motor Industry Association (KMI) shows that Toyota recorded a 11.3 per cent drop in unit sales in the first half year to 1,335 despite new car sales rising 8.6 per cent to 6,390 units in the period.
This cut the dealer’s market share from 25 per cent to 21 per cent last June, the lowest since 2005. Industry players said that Toyota was losing steam due to its small presence in the trucks and buses segment, which has become a market share driver for rivals like General Motors.
This prompted Toyota to enter the bus and trucks market with the Hino brand in February, with the company selling 21 vehicles as of June.
Toyota’s market share has dropped from a high of 26.1 per cent in 2006.