New vehicle dealers and assemblers have reported a 2.74 percent drop in domestic sales to 11,059 units in the year ended December 2024 on the back of deterrent cost of borrowing amidst depressed circulation of cash in a softening economy.
Fresh numbers from Kenya Motor Industry Association (KMI) show that orders processed by firms such as Isuzu East Africa, CFAO Motors Kenya and Simba Corporation fell further last year from 11,370 units in 2023.
Demand for new vehicles has now declined for the third year running, with sales in 2024 the lowest reported since 2010.
Dealers have in recent years complained of elevated interest rates, which have hit demand because most new vehicle purchases are funded by banks, while accumulating pending bills yet to be settled by the government and private firms have eroded their cash flow positions.
“Interest rates have been high, meaning most of our customers were not able to get funding,” Rita Kavashe, the managing director for Isuzu East Africa, said in an interview early 2024.
“We have not seen such an interest rate in many years and so it is tough for our customers too.”
The cost of loans was on an upward trajectory in 2024 despite the Central Bank of Kenya’s signalling to lenders to lower interest rates later in the year, after cutting the base rate by 175 basis points between August and December to 11.25 percent.
Despite the CBK rate cuts, commercial banks raised average interest rates to 17.22 percent in November from 16.84 percent, industry data shows.
The elevated cost of borrowing, where some banks are charging in the upwards of 20 percent, added to the industry woes of 2023 and 2022 when dealers battled high exchange rates, difficulties in accessing dollars and increased taxation amid bottlenecks in global supply chains.
The KMI data shows that CFAO Motors Kenya was the only one of the four major dealers, which control more than 90 percent market share, to have posted a growth last year.
CFAO — which sells multiple brands such as Toyota, Mercedes, Volkswagen and Hino under one roof — sold 3,789 units, a 2.71 percent rise over 3,689 units in 2023.
Market leader Isuzu reported a 3.45 percent drop in sales to 5,156 units from 5,340 vehicles a year earlier. Simba Corp sales contracted 8.69 percent to 977 units, while Tata’s retreated 16.44 percent to 432 units.
Isuzu —which sells pick-ups, buses, trucks and sport utility vehicles (SUVs)— reported its share of the market dropped marginally to 46.62 percent from 46.97 percent in the prior year.
Increased sales helped CFAO, which merged operations of Toyota Kenya and DT Dobie in May 2023, to increase its share to 34.26 percent from 32.45 percent.
The share of Simba Corp, which holds multiple franchises, including Mitsubishi and Proton brands, fell to 8.83 percent from 9.41 percent, while Tata’s dropped to 3.91 percent from 4.55 percent.
The industry data further shows that sales, including exports by the likes of Isuzu and Scania, dropped 3.45 percent to 5,156 vehicles.
Vehicles are among the commodities that have witnessed one of the biggest price increments in the past three years, partly due to increased taxes.
The Kenya Revenue Authority increased the duty on shipping cars into the country from 25 percent to 35 percent from July 2023 after the East African Community (EAC) Council of Ministers approved Kenya’s application to levy a higher rate than the 10 percent common external tariff (CET) for the eight-nation EAC bloc.
Importation of vehicles further attract excise duty ranging from 25 percent to 35 percent depending on the size of the engine, in addition to the standard 16 VAT.
Excise tax is charged on the sum of landed cost of the car and import duty, while VAT is applied on the resultant value [the sum of landed cost, import tax and excise duty].
