Excess vehicle supply leads to drop in car prices

Excess vehicle supply leads to drop in car prices

 A growing demand for new cars was outstripped by excess supply as a 31.35 per cent increase in vehicles led to a drop in prices in May 2017.

According to a report by Data Fintech, a Kenyan consumer data broker, demand for cars increased by 9.74 per cent in May, which was not matched by supply with dealers selling cars rather expensively especially those between 0-5 years old.

Dealer’s selling cars in that age bracket were forced to contend with a market that was tilted in favour of consumers.

The report however, indicates that selling cars that are 11 years and above should be what dealers are getting into as there is an 11 per cent increase in demand in the market place.

Cars with higher mileage experienced an 18.37 per cent soar in demand while those with lower power also experienced a 17.36 per cent increase in demand. This led to an increase in prices of cars with a mileage above 100,000 kilometers and 0-1500cc power engines.

Vehicle maker Toyota maintained its top position while Nissan came in second. Toyota’s lead ws significant as the car dealer had 4 times the demand of a Nissan car.

The study was based on data collected on Cheki Kenya, the first automotive online marketplace in Kenya.

The Cheki DF Automotive Report analyses auto valuation and consumer demand in the Kenyan marketplace for specific criteria such as body type, vehicle age, engine capacity and mileage.

The data comes at a time when sales of new luxury cars in Kenya dropped by 10.6 per cent in the first half of the year, mirroring the overall downturn in the new vehicles market that has been hit by an economic slowdown.

According to the Kenya Motor Industry Association (KMI), sales of high-end cars such as Porsche and Mercedes stood at 118 units in the period compared to 132 a year earlier.

Total sales in the new vehicle market dropped 19.8 per cent to 5,738 units in the same period. Luxury car dealers say their orders have declined owing to tighter credit markets, uncertainty over the upcoming general election and business slowdown.

All the luxury car brands recorded a drop in sales save for BMW and Mercedes whose sales rose 144.4 per cent and 21.8 per cent respectively.

Meanwhile Jaguar sales declined the most at 58.8 per cent to seven units. This was followed by Jeep Grand Cherokee’s 50 per cent to four units while Porsche orders fell 43.3 per cent to 17 units. Land Rover sales dropped 19.4 per cent to 29 units.

Mercedes and Jeep are sold by DT Dobie. BMWs are distributed by Bavaria Auto Limited, a subsidiary of Simba Corporation. Jaguar and Land Rover models including Ranger Rover and Discovery fall under RMA Kenya. Porsches are sold by Porsche Centre Nairobi.

Kenya’s automotive industry has been growing in recent years. A 2016 report by Deloitte suggests that there is still room for growth in local vehicle sales.

In a country of 44 million people, the total vehicle fleet is just over 1.3 million, putting the ownership rate at around 28-29 vehicles per 1,000 people. The majority of these vehicles are second-hand cars sold by dealers and online platforms such as Cheki. Taxi businesses such as Uber, Taxify and Little Cab have also brought with them an increase in demand of vehicles for business.

Taking advantage of the opportunity, international companies are looking to open plants in Kenya. Japan’s Toyota and General Motors already have a presence in the country. Earlier this year, Peugeot announced plans to restart production in Kenya. Germany’s Volkswagen also inaugurated a new product facility in Thika on December 2016.

In March last year the US-based manufacturer, Daimler Trucks Asia began the process of setting up presence in Kenya’s second largest city, Mombasa.


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