New vehicle sales dropped 18.7 per cent in the first nine months of the year, with dealers attributing the slump to tighter credit markets and political uncertainty.
Dealers including Toyota Kenya and Isuzu East Africa sold 8,427 units in the period ending September compared to 10,368 units a year earlier, according to data from the Kenya Motor Industry Association.
Sales of Isuzu EA, for instance, fell to 2,935 units in the period compared to 3,569 units the year before. Toyota Kenya’s unit sales also dropped to 1,953 from 1,973.
“Industry sales have been affected by the political uncertainty and the capping of interest rates, which has particularly made it difficult for SMEs to get financing,” said Rita Kavashe (left), the CEO of Isuzu EA.
“We now expect total industry sales to close at 10,700 units compared to our earlier estimate of 12,000 units.”
The lower forecast, if it materialises, will place the industry’s orders at a level last seen in 2009.
Most new vehicle purchases are financed by banks, with the credit crunch directly hurting sales in the industry.
Banks have responded to the capping of interest rates by lending to the government and blue-chip firms, locking out a large number of prospective individual and SME borrowers.
The lenders say the thinner lending margins in the current environment cannot accommodate riskier borrowers, a move that has led to a major credit slowdown.
Central Bank of Kenya statistics show that growth of private sector lending stood at 1.6 per cent in August after months of steady decline, with agriculture, manufacturing, trade and mining industries recording significant reduction in credit access.
The run-up to the August General Election also led to suspension of vehicle purchases among other capital investment decisions, with the uncertainty extended by the nullification of the presidential results and orders for a new poll.
Consumer spending and business expansion tends to slow down when elections approach, hurting vehicle dealers and sellers of other high-value goods.
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