Mombasa vehicle dealers plan open-air sale day to boost sales

Car dealers in the coastal city of Mombasa in a new move to attract more buyers have planned a mega open-air sale day.

The Car Dealers Association Chairman Peter Otieno termed the strategy as timely, enabling buyers and sellers to access the market and offering the platform of a meeting.

"Currently we have a plan where someone can bring his or her vehicle willing to sell, and at the same time, dealers will have the opportunity to display their new model for a small fee," he said.

This decision will be a once-in-a-while break away from the traditional car bazaars or marketplace cars lined up in enclosed roadside yards for customers to view, choose, and purchase models of their preference.

According to the auto vendors, another advantage of the open day is that it allows shoppers to purchase their favourite models at a lower cost than when they are in showrooms. This measure, Otieno explained, will eliminate intermediaries or brokers who have been exploited by buyers.

Although the date for the open day hasn't been announced, the association also said that the buyers will also conduct transactions in Kenyan shillings, eliminating the complications associated with foreign currencies.

Kenya imports more than 70 per cent of its second-hand vehicles from Japan, while the United Arab Emirates, United Kingdom, Singapore, Thailand, and South Africa share the 30 per cent market.

Sales of new vehicles fell 17.66 per cent in the first quarter of the year, marking the sharpest drop in seven years, largely on increased taxation, rising interest rates, and battered shilling.

New vehicle dealers and assemblers sold 2,271 units in the January–March 2024 period, compared with 2,758 units in the same period last year, data tracked by the Kenya Motor Industry Association shows.

The double-digit decline, amid weak corporate and household earnings, pushed orders for new motor vehicles to the lowest levels in a decade, based on analysis of available KMIA numbers dating back to 2015, when demand peaked.

Dealers, including Isuzu, CFAO, and Simba Corporation, have complained of a tough operating environment since last year.

They have cited climbing interest rates, which have depressed demand as most of the orders are financed by banks while accumulating pending bills yet to be settled by the government and private firms have exhausted cash flow positions.

"The market is still difficult, but thank God, the exchange rate is beginning to turn. It has been difficult to import vehicles and vehicle parts because we needed to buy dollars to get these materials from abroad.

"Aside from the bad [exchange] rate, it was also hard to get dollars," said Rita Kavashe, managing director at Isuzu East Africa.

The Kenya Revenue Authority increased duty on shipping cars into the country from 25 per cent to 35 per cent in July after the East African Community Council of Ministers approved Kenya's application to levy a higher rate than 10 per cent of the common external tariff for the seven-nation EAC bloc.

Importation of vehicles further attracts excise duty ranging from 25 per cent to 35 per cent depending on the size of the engine, in addition to the standard 16 value-added tax.

Excise tax is charged on the sum of the landed cost of the car and import duty, while VAT is applied to the resultant value [the sum of the landed cost, import tax, and excise duty].

The KMIA data shows Isuzu East Africa and CFAO Motors Kenya, which control about three-quarters of the new vehicle sales by volume on average, were among the dealers hardest hit in terms of sales.