The Kenyan motor vehicle industry recorded an alarming dip in sales during the first quarter of 2023, with a 13.9% reduction in units sold compared to the same time-frame in the previous year. Kenya Motor Industry Association (KMIA) data revealed that formal car dealers moved only 2,758 units, down from 3,203 units, indicating yet another challenging year for a sector facing multiple difficulties, including the weakening of the shilling.
The dip in sales has affected major dealers like Simba Corp and Isuzu East Africa, with the former recording the largest decline of 26.8% while Isuzu’s orders dropped 3.3%. Only CFAO Motors, the dealer of Hino and Toyota brands, recorded growth with a 2.9% increase in sales to 793 units.
The confluence of rising vehicle prices and higher interest rates has impacted sales in an industry where the bulk of purchases are financed by banks. These institutions have recently increased loan costs amid high inflation and monetary tightening by the Central Bank of Kenya. In response, dealers like Gabriel Kanyingi, general manager for commercial finance at Isuzu, have implemented price adjustments upward of 10% to counteract the effect of the strengthening dollar.
Last year, formal dealers posted a 6.3% sales decline to 13,352 units. However, some observers see hope in the recent changes taking place in the passenger car segment, which accounts for approximately 15% of annual sales.
CMC Motors is exiting this area to focus on agricultural equipment, thereby opening an opportunity for rivals to take over the Ford, Mazda, and Suzuki brands it had been selling. Salvador Caetano, currently a Renault, Hyundai, and Kia dealership owner, will add Ford to its portfolio, while CFAO Toyota will sell Suzuki on an exclusive basis.
Ford was the most significant franchise for CMC in the passenger vehicle market, accounting for 78.7% of its total vehicle sales last year, with sales of 388 units of Ford pick-ups and SUVs.
However, KMIA data shows that the firm’s American vehicle sales have dropped by more than half from highs of 927 units in 2015. While the sales decline has been a challenge for the Kenyan motor vehicle industry, industry players are optimistic about its future and are keen on identifying opportunities to overcome the difficulties it currently faces.