In the last year, new vehicle sales in Kenya dropped by 20.78 percent. This was caused by the sluggish economy, new interest rate cap, and prolonged highly contended presidential elections.
The drop in car sales was despite the investment made by Volkswagen in the country. The leading motor corporation set a new vehicle assembly plant in Thika, Nairobi. Prospects for long-term economic growth and Kenya’s strategic location were among major factors that attracted Volkswagen to invest in the country.
Reports from the chair of Kenya Vehicle Manufacturers Association, Rita Kavashe indicated a drop in vehicle sales to 10,722 in 2017. This is from the 13,535 vehicles sold in 2016. Kavashe said that the decline was due to the poor economic performance experienced in part of 2017.
The country hit its lowest economic growth rate from 2013 at 4.4 percent in third quarter, 2017. This was due to the political uncertainty resulting from nullification of initial presidential election by Supreme Court. The economy was also affected by the very low-interest cap imposed in the end 2016. This prompted banks to refuse to lend to medium to small enterprises. General sales of vehicles were therefore affected.
Miss Kavashe said that the cap on interest rates made it difficult to access credit which was the leading cause of declined car sales. Before the introduction of the cap, Kenya had hit the highest mark at 20,000 sold units in 2015. However, she said that there was optimism that this year, sales would rebind towards the 2016 levels.
Used imported cars mostly from Japan dominates the vehicle market in Kenya. These cars account for 89 percent of the total vehicle sales made in Kenya, annually. Various vehicle manufacturers have shown interest in the Kenyan market which has growing demands for newer and eco-friendly cars. Volkswagen aims at doubling their total production. Similarly, Volvo and Peugeot have announced plans to also set assembly plants in Kenya. Isuzu increased their local presence by purchasing 57.7% stake from General Motors in Kenya, last year.
Miss Kavashe said that the Kenyan market still had high prospects for the future.