New vehicle dealers eye record sales in 2015

Selling 17,499 new vehicles last year marked a new high for Kenyan dealers who were, for a long time since liberalisation of motor trade in the 1990s that paved the way for sale of used cars, stuck below 10,000 units.

At more than 17,000, the number of units sold last year was 20.3 per cent higher than the previous year’s 14,542 units.

The Business Daily spoke with Ms Rita Kavashe, the CEO of Kenya’s largest auto dealer General Motors East Africa, on the industry’s issues and dynamics of the new vehicle market.

To what would you attribute last year’s record sales?

There are multiple factors but an increase in government orders, commercial activity and infrastructure projects like the Standard Gauge Railway stand out. These sources of demand have seen sales of commercial vehicles including pick-ups, buses and trucks rise significantly.

Higher sales, of course, are also a reflection of a healthy economy in a broader sense.

We expect sales to reach 19,000 units this year. The government can also support the local industry by ensuring that infrastructure projects have a significant local sourcing component, which is articulated and adhered to.

Due attention should, for example, be paid to demand by contractors of vehicle specifications that lock out local dealers.

What would you say are the major challenges to the expected sales growth this year?

Insecurity looks to me as the biggest source of downside risk In the absence of that, the outlook is promising in the context of other favourable macroeconomic factors like the drop in fuel prices and stable interest rates.

The government has recently gone big on leasing vehicles to reduce the public transport budget. What challenges and opportunities do you seen in this new model?

Some companies like British American Tobacco and Coca-Cola have been leasing for years and it has worked well. Government leasing will however offer lessons in terms of leasing to the public sector.

Initial indications are that government agencies are not as careful and there are relatively more accidents.

There needs to be a reasonable resale value at the end of the leasing contract; so rules and responsibilities need to be clearly defined.

Leasing terms will vary depending on a customer’s risk profile. Entrenchment of leasing is generally good for dealers and the wider economy.