Kenya motor industry sales dip

November 11, 2009
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, NAIROBI, Kenya Nov 11- Kenya’s motor industry has witnessed a drop in the sale of showroom vehicles with 10,000 units were sold by October compared to the 13,000 units in 2008, marking a 23 percent drop in car sales.

Toyota East Africa Managing Director Hylton Bannon on Wednesday attributed the drop to the rising number of used vehicles on the local market.

“The ratio between new units and second hand vehicles is 1:5 which is an indication that less people are opting for first hand vehicles,” Mr Bannon said.

Kenya’s second hand car market has been witnessing renewed growth with a rise in demand for Japanese models.

In August, it was reported that Kenya became the largest importer of Japanese vehicles in Africa overtaking South Africa.

The preference for used vehicles has seen a rise in the number of used car dealers who have been making a large profit from the growing demand. Individuals have also joined the fray, opting to import cars, which they sell to local motorists.

Mr Bannon said the economic crisis had not done much to reverse the situation as more people are forced to tighten their spending opting for the cheaper second hand vehicles.

For instance, a brand new Toyota Rav 4 from the showroom would cost one Sh3 million while one from a second hand car dealer would cost anything from Sh1.8 million.

But even with this trend projected to carry on into 2010, Toyota East Africa plans to invest $10 million (Sh741 million) in the next three years, to increase its hold on the Kenyan market, which is currently at 24 percent.

“In a shrinking economy you must do everything not to lose your share,” Mr Bannon stressed.

The money will go into expansion of vehicle logistic centres out of Nairobi to capture the growing number of customers finding it difficult to drive into the city.

“We are looking to put the service centres closer to the customer so that it makes it easier for them to move to and fro,” he said.

Toyota has already opened up a new Yamaha branch in Kisumu and is in the process of renovating their body and paint shop to meet international standards.

Toyota has also set up Tsusho Capital, a subsidiary of Toyota Tsusho Corporation a Japanese company operating globally. Tsusho will offer customers total vehicle leasing solutions for those not interested in buying new cars.

It mainly targets the business community in Kenya to help with off balance sheet financing which gives a company improved debt to equity ratio and return on asset ratios.

Businesses that lease new Toyota vehicles will have the option of swapping their entire fleet for newer vehicles.

“Our focus is to provide solutions to corporate, multinationals and SMEs with the ultimate goal of becoming the leading supplier of financial products and services to Toyota customers in Africa,” Mr Bannon said.

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