Companies

Wealthy Kenyans lift Range Rover, Mercedes orders 73pc

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Mercedes-Benz (whose franchise is held by DT Dobie) is among the top-selling luxury brands. FILE PHOTO | NMG

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Summary

  • Wealthy Kenyans have increased orders for luxury cars like Mercedes-Benz, Porsche and Range Rover by 73 percent in the three months to March, defying the general slowdown in economic activity in Quarter One.
  • Data from the Kenya Motor Industry Association (KMI) shows that dealers sold a total of 45 units of the high-end cars in the review period compared to 26 units a year earlier.
  • The jump in sales came in a period when Kenya’s economy had experienced little effects of the coronavirus pandemic, given the bulk of movement restrictions started to apply from the end of March, when the country had 59 Covid-19 cases compared to the current 607 as of Thursday.

Wealthy Kenyans have increased orders for luxury cars like Mercedes-Benz, Porsche and Range Rover by 73 percent in the three months to March, defying the general slowdown in economic activity in Quarter One.

Data from the Kenya Motor Industry Association (KMI) shows that dealers sold a total of 45 units of the high-end cars in the review period compared to 26 units a year earlier.

The jump in sales came in a period when Kenya’s economy had experienced little effects of the coronavirus pandemic, given the bulk of movement restrictions started to apply from the end of March, when the country had 59 Covid-19 cases compared to the current 607 as of Thursday.

The purchase of luxury cars was a better performance compared to the overall new vehicle market that saw sales slump 1.6 percent over the same period to 2,698 units from 2,741 units.

Mercedes-Benz (whose franchise is held by DT Dobie) was the top-selling luxury brand at 17 units in the first quarter, up from 13 units a year earlier.

Unit sales for Land Rover (under Inchcape Kenya), increased to 12 from 11. Inchcape also sold eight BMW cars in the first quarter, having failed to obtain stocks in the previous period. The company, which sold two Jaguar cars in last year’s first quarter, did not sell any of the high-performance cars in the review period.

Porsche Centre Nairobi sold seven cars in the first three months of the year. It did not sell any cars in the corresponding period last year due to stock-outs. Bentley Nairobi also resumed sales with one unit, having also run out of stocks of the brands in the prior period.

While luxury car dealers recorded strong sales growth in the first quarter, they say demand has since collapsed due to the lack of bank financing and the spread of the coronavirus.

“Sales since April have been terrible,” an executive at one of the dealers told the Business Daily. “Banks are not lending and most of our customers rely on loans to fund their purchases.”

Besides lack of loans, the industry has also suffered from tighter checks on large cash transactions, with a bank deposit of $5,000 (Sh530,000) or more triggering questions on the sources of the money and the intended use.

High-end cars, whose prices can top the Sh30 million mark, are among the discretionary goods whose sales are expected to take a hit in an economy hard hit by restrictions to slow down the spread of coronavirus.

Government departments like the Judiciary, private companies and high-net-worth individuals are the buyers of luxury cars in the country. The government and private firms are currently implementing austerity measures to conserve cash while household wealth is taking a hit from reduced salaries and falling prices of assets such as properties.

The new vehicle market expects sales for the whole of 2020 to record its worst performance 15 years. The industry, comprising dealers such as Simba Corporation, Toyota Kenya and Isuzu East Africa, 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 percent this year,” Rita Kavashe, CEO of Isuzu East Africa, said in a recent interview.

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