High fuel prices drive down motorcycle sales

The rising fuel prices have cut boda boda and tuk-tuk operators’ margins, leading to reduced demand for motorcycle sales. FILE PHOTO | LUCY WANJIRU | NMG

The rising fuel prices have cut boda boda and tuk-tuk operators’ margins, leading to reduced demand for motorcycle sales.

Car & General, one of the major sellers of motorcycles in the country, says it has seen a 53 percent reduction in sales of two-wheelers (boda bodas) and three-wheelers (tuk tuks) during the six-month period that ended March.

The Nairobi Securities Exchange-listed firm says there has been a fall in the daily take-home earnings by riders in an environment of rising fuel prices and subdued consumer demand, hurting the demand for new motorcycles.

“Motorcycle purchases have been affected by lower consumer purchasing power which has reduced the daily utilization of 'boda boda',” said Car & General.

“The daily unit profitability, especially given the higher fuel costs, has deteriorated leading to lower levels of demand. As a result, our Kenya trading operation has seen a significant drop in volume, profitability and higher inventory holding costs.”

Car & General had in a last year study estimated that each rider was making an average of Sh1,000 per day from an average of 15 rides.

But prices of a litre of petrol are now at Sh182.7 in Nairobi compared with Sh177.3 last December while that of diesel has moved from Sh165 to Sh168.40 during the period, eating into riders’ margins.

Car and General, which expects motorcycle demand in Kenya to remain subdued for the foreseeable future, saw an 85 percent fall in net profit to Sh96.7 million in six months ended March from Sh629 million in the preceding similar period.

Data from the Kenya National Bureau of Statistics (KNBS) shows that newly registered motorcycles fell by 53.9 percent from 285,203 units in 2021 to 131,513 units last year—the lowest in six years.

The drop in registration of new motorcycles is the lowest level since 2016 when new registrations were 123,539 despite the import price declining by 29.4 percent to an average of Sh42,866 per unit last year.

Motorcycles are popular with Kenyans seeking to beat traffic jams in congested towns and cities or tackle difficult terrains in rural areas with impassable roads.

They are also popular for the delivery of lightweight goods including food, shopping, and parcels.

Courier firms and technology-enabled delivery platforms are among the major users of motorcycles alongside individuals operating boda boda businesses.

PAYE Tax Calculator

Note: The results are not exact but very close to the actual.