Companies

Covid-19 to drive down new vehicle sales 30pc

toyota

Toyota Kenya showroom along Mombasa Road. FILE PHOTO | NMG

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Summary

  • Sales of new motor vehicles are projected to fall up to 30 per cent this year to reach 15-year lows following severe travel restrictions and reduced economic activities in the wake of the coronavirus pandemic.
  • Dealers reported marginal sales drop in the first quarter ended March but April saw a major decline that is expected to persist in subsequent months, hence the bleak forecast.
  • The industry, comprising dealers such as Isuzu East Africa, Toyota Kenya and Simba Corporation, reported sales of 13,199 units last year.

Sales of new motor vehicles are projected to fall up to 30 per cent this year to reach 15-year lows following severe travel restrictions and reduced economic activities in the wake of the coronavirus pandemic.

Dealers reported marginal sales drop in the first quarter ended March but April saw a major decline that is expected to persist in subsequent months, hence the bleak forecast.

The industry, comprising dealers such as Isuzu East Africa, Toyota Kenya and Simba Corporation, reported sales of 13,199 units last year.

They now expect to move about 9,240 units this year, a level that will fall below lows of 9,451 units recorded in 2006.

“We expect the industry’s sales to fall by up to 30 per cent this year,” said Rita Kavashe, the chief executive of Isuzu, the country’s biggest dealer by unit sales.

“This is primarily due to the travel restrictions. The other major issue is that banks have stopped financing new vehicle purchases for most customers.”

In the first quarter ended March, the dealers’ sales dropped 1.6 per cent to 2,698 units compared to 2,741 the year before.

Ms Kavashe noted that major sales decline started in April, with the mainstay commercial vehicles including trucks, pickups, vans and buses being hardest hit.

The government implemented a nationwide dusk-to-dawn curfew besides banning travel in and out of Nairobi, Mombasa, Kilifi and Kwale counties as part of measures to contain Covid-19 that has killed 24 people.

The novel coronavirus, which causes the disease, has infected more than 460 people since the first case was announced on March 12. The travel restrictions have hurt earnings of cargo transporters and public service operators and left them with excess capacity, reducing their need to expand their fleets.

Banks have also become more risk averse in the wake of the economic dislocation brought by the spread of the coronavirus. Lenders are staring at a sharp rise in defaults to which they are required to respond by raising their provisions for the bad debt.

Banks are currently willing to finance vehicle purchases by sectors deemed by the government as offering essential services such as healthcare, Ms Kavashe said.

“Interest rates on bank loans are favourable but the issue is access to the credit,” she said.

The sharp contraction in the industry is set to hit tax revenues besides risking job losses. Kenya Revenue Authority collects billions of shillings from motor vehicle sales through a plethora of taxes.