New vehicle dealers get a big boost as rules push bus sales
Former General Motors MD Bill Lay and Matatu Owners Association chair Simeon Kimutai launch Smart buses. GM will expand its assembly capacity to cater to renewed demand. Photo/FREDRICK ONYANGO
Dealers in new vehicles are recording higher sales of buses driven by the government’s phase out of 14-seater vans used in public transport, helping boost the recovery of Kenya’s motor industry.
The dealers sold 481 buses in the four months to April from 392 buses in a similar period last year, representing a 23 per cent growth, data from the Kenya Motor Industry Association (KMI) shows.
“The increased demand is being driven by the new regulations,” said Mr David Kamau, the head of the buses division at CMC Motors.
“Banks are also coming in strongly to finance new bus acquisitions in the PSV sector where greater discipline is expected from the regulations.”
Registration of 14 seater vans has been banned since January this year, a move that is forcing investors to buy higher capacity buses to expand their fleet.
Fourteen-seater vans account for about 70 per cent of the vehicles in the public transport sector and their gradual phase out is expected to create demand for buses, benefiting CMC Motors, General Motors, and Marshalls that are major players in the new bus market.
The preference for the 14 seater vans by investors in the public transport market has denied the auto dealers an opportunity to sell more buses, which was worsened by the fact that most businessmen opted for the cheaper imported versions.
But the shift to higher capacity buses is set to increase sales among the new autodealers as investors prefer to buy new rather than used buses.
The supply of used buses is also unreliable compared to that of used 14 seater vans.
The new cars industry appears to be back on the road to recovery after it reported a 32 per cent growth in sales compared to last year, a trend that signals the sector could take less time than expected to match its peak performance of 2008.
Data from the Kenya Motor Industry (KMI) shows that 2,451 vehicles were sold in the three months to March compared to 1,851 in the same period last year, helped by the rising sales of pick-ups, buses and trucks.
Players in the new bus market are gearing up for increased competition for the lucrative market, betting on new and low cost models to drive sales.
CMC Motors started importing Nissan Diesel and Eicher bus brands last year to tap into the expected increase in demand for buses while GM –which assembles its buses locally—has announced plans to boost production capacity in tandem with the growing demand.
“We expect to increase our assembly capacity by 1,000 units by the end of this year,” Mr Bill Lay, the immediate former chief executive of GM told the Business Daily in an earlier interview.
The dealers are selling buses from Sh1.6 million up to Sh8 million, compared to less than Sh1million for 14-seaters.
Co-operative Bank last week lent Sh20 million to Chania Travellers Sacco that went to purchasing of 21-seater buses from GM, underlining the increased confidence lenders have in the transport sacccos and companies that investors now have to join by law to get an operating license.
In February, the government compelled PSV operators to form saccos, franchises, or transport companies in a bid to promote self regulation.
