Car sales down 26pc as Covid-19 woes bite

Sales of new motor vehicles dropped 26.4 percent in the six months ended June, weighed down by the economic disruption brought by Covid-19 pandemic.

Data from the Kenya Motor Industry Association shows that the formal dealers including Isuzu East Africa and Toyota Kenya saw their sales decline to 4,628 units in the review period.

This was down compared to 6,294 units in the comparable period last year.

Most of the slump occurred in second quarter (April to June), reflecting the impact of travel restrictions and general economic fallout from the disease.

Sales in this quarter dropped 44.8 percent to 1,930 units, a much larger fall compared to the first quarter (January to March) when orders shrunk 3.5 percent to 2,698 units.

“The year 2020 started well, as the industry built up on the momentum from 2019. However, there was a drastic drop from March to May 2020 due to the Covid-19 effect on the economy,” said Arvinder Reel, the managing director of Toyota Kenya.

The country recorded its first case of coronavirus in mid-March, causing panic and triggering a series of measures to contain the spread of the disease.

The government banned international travel and closed bars and schools.

Ban on travel in and out of Nairobi Metropolitan area, Mombasa and Mandera counties was also imposed and lasted from April 6 to July 6.

The travel restrictions and closure of schools had a particularly debilitating impact on sales of the mainstay commercial vehicles.

“Overall, sales of commercial vehicles (pickups, 14-seater minibuses, trucks and buses) contributes 50 percent of total new vehicles market,” Mr Reel said.

“Unfortunately, this is the segment that has been the most affected due to restriction of travel/movement and lock-downs of the major towns.”

The travel restrictions had hurt earnings of cargo transporters and public service operators and left them with excess capacity, reducing their need to expand their fleets. Average monthly sales in the first half of the year dropped to 771 units compared to 1,049 units a year earlier.

Sales fell to their lowest at 568 units in May and then rose to 762 units last month, with dealers hoping that the upward trend can be maintained if the economy remains open going forward.

“We are optimistic that this positive trend will continue as the national government puts in place guidelines that will help in re-opening the economy,” Mr Reel said.

A sales rebound will be critical in avoiding job losses in the industry and lower revenue for the taxman.

The Kenya Revenue Authority collects billions of shillings from motor vehicle sales through a plethora of taxes.

Local motor vehicle assemblers including Isuzu East Africa and Associated Vehicle Assembly (AVA) alone contribute tax revenues of $80 million (Sh8.6 billion) annually, according to a recent government study.

As part of its stimulus spending to counter the economic fallout from the pandemic, the government said it would buy locally assembled vehicles worth Sh600 million.

The amount is, however, small and represents less than five percent of the value of locally assembled vehicles per annum.