Used car sales drop in Q3 after first half spike

Sales of used motor vehicles dropped by 1,000 units in the three months to September, putting brakes on a boom that saw purchases rise by a fifth in the first half of the year.

Data from the Kenya National Bureau of Statistics shows that 22,735 units of used vehicles were sold in the third quarter compared to 23,735 units in a similar period last year, representing a 4.2 per cent drop. This marks a departure from the performance in the first half when a huge appetite for used cars pushed up sales 19.4 per cent to 34,445 units, helped by lower pricing and increased bank loans.

Yesterday, the Kenya Auto Bazaar Association of Kenya, the dealers’ lobby, could not explain the drop.

“I can’t put a reason to the drop in sales. In fact I am surprised that second hand car sales have decreased in the period,” said secretary-general, Charles Munyori.

The drop came in a period when the taxman released a new list of base prices used to calculate import duties, raising the cost by double digits.

The reference prices for Toyota Prado, Honda Accord and Honda Civic among other models rose by between 10 and 20 per cent as from June 1. Importers have in turn adjusted prices upwards by between Sh50,000 and Sh200,000, leading to a sharp jump in display yard prices.

Second hand car dealers have in recent months benefited from increased financing by the banks. But in the third quarter, banks recorded a 10.9 per cent drop in profits at Sh33.5 billion compared to the second quarter, suggesting slow cash flows.

Second hand cars account for about 80 per cent of total vehicles sold in the country, relying on demand from businesses and individuals who are unwilling or unable to pay more for new units. But the KNBS data shows new car sales grew 13.7 per cent to 4,145 in the third quarter of the year in what players attribute to recent national government car leases and purchases by governors in the devolved units.

The national government has entered into a multi-billion-shilling contract with new auto dealers for leasing police vehicles as part of austerity measures. Toyota dominated the leasing tenders, winning the maiden Sh3 billion contract to supply 1,100 vehicles to the police service late last year. The firm in September won another deal to lease 500 units to the same institution at a cost of over Sh1 billion.

READ: Vehicle leasing drives up sales of new units 30pc

The latest leasing contract, in which the government ordered a total of 1,430 units from the dealers including Toyota, is part of a plan that will see the State lease a total of 2,700 vehicles in the near term.

CMC was the only other major dealer that won in the new contract, having been awarded 530 units, with the remaining units taken by smaller dealers like Ecta Kenya that sells Subaru cars.  

Besides the tenders, Toyota also benefited from increased demand for its Hino brand of buses and trucks, whose sales jumped to 538 units from 95 units in the same period.