Even with the rising middle class and increasing disposable incomes, eighty-three percent of vehicles bought in Kenya in the last two years were used vehicles, according to a survey recently conducted by PwC titled Kenya Motor Vehicle Sector: Driving Growth in the Economy. 8 vehicles out of every ten purchased! That is a significant number, which new vehicle dealers are surely working hard to tip in their favour.
Ever since the liberalization of the motor vehicle market in the 1990s, the ease with which used vehicles are imported has been growing, eating into the potential sales of new vehicles. On the converse, used vehicle dealers argue that their sales have not impacted new vehicle sales because the target markets are different, thus buyers of new vehicles would not consider used vehicles.
This is true to the extent that once one buys a new vehicle, they would not easily consider purchasing a pre-owned one. However in the margin between the buyers of new vehicles and those who buy used vehicles, there might be a grey area which could be swayed to either side.
The PwC survey reveals that customers are conscious of the brands they buy, and also consider the cost of owning a new vehicle. New vehicle dealers will tell you that although on the onset used vehicles are cheaper, there are many associated and hidden costs that come with maintaining a used vehicle that customers may not foresee at the time of purchase.
When buying a vehicle, customers of used vehicles need to consider what it would cost to service their vehicles when they break down. On the other hand, new vehicle users will tell you that this is not one of their considerations since the vehicles are serviced for free within a certain mileage, and, being new, they are less likely to break down.
There are many other considerations that may be factored in when choosing whether to own either a new or a used vehicle which are highlighted in the report. Understandably though, not all vehicle users can afford new vehicles.
The question that comes to mind is: if new vehicles have such marked benefits over used vehicles, how come new vehicle dealers have not managed to convince more people to buy them? There could be a myriad of reasons, but one reason seems to be the absence of a relationship between new vehicle dealers and their intended market.
The assumption is that when a person needs a new vehicle, they will walk into the showroom. However the survey shows that this is not necessarily the case; buyers today consider many dynamics when making a purchase decision, and this they do through various media. One important thing new vehicle dealers need to do to increase their vehicles sales is to educate their potential users on the benefits of buying new.
They should also convince their customers of the need to purchase a new vehicle instead of a used one to make them consider what they offer. All in all, new vehicle dealers need the right market intelligence to enable their customers make that first step to buy a new ride.
Kananu Imathiu is a Consultant with PwC’s strategy consulting practice.