The State plans to acquire 400 locally-assembled cars for ministries, departments and agencies in a shift of policy aimed at boosting auto dealers whose sales slumped by almost half in April in the wake of Covid-19.
Treasury Secretary Ukur Yatani is seeking approval from legislators to spend Sh600 million on acquiring the new vehicles for public service officials, meaning a unit will cost Sh1.5 million on average.
The move is aimed at easing dealers’ cash crunch at a time when firms like Toyota and Isuzu East Africa have stepped up local assembly.
But the effects of the coronavirus have cut orders from firms keen to preserve cash and cut costs together with restrictions on travel that have slowed down demand for cars, especially pick-ups.
If lawmakers approve it, the car purchase plan will signal a possible shift in government policy in which it had opted to lease vehicles under a State austerity plan.
This will help keep the car dealers afloat and protect jobs at a time when corporate Kenya has turned to layoffs, pay cuts and unpaid leave in their quest for survival.
The industry, which is dominated by Isuzu East Africa and Toyota, said 594 new units were sold during the period, down from 1,127 units sold in April last year.
The drop started in March when the first case of Covid-19 was reported in Kenya, as sales fell to 846 units from 1,049 in February, the Kenya Motor Industry Association said.
“We expect the industry’s sales to fall by up to 30 percent this year. This is primarily due to the travel restrictions,” said Rita Kavashe, MD of Isuzu East Africa, adding that the freeze in bank loans would worsen outlook. The planned budget for new cars will be one of the highest in a single financial year since the 2009-10 financial year.
At the time, President Uhuru Kenyatta, then Finance minister, enforced an austerity measure that saw ministers and other top officials replace expensive Land Cruiser and Mercedes Benz limousines with Volkswagen models that had a lower engine capacity of less than 1,790cc.
Kenya undermined what was once a thriving local assembly industry in the 1990s with policies that encouraged cheap secondhand imports. It is now seeking to attract manufacturers back to help create jobs and support growth.