Why Fewer Kenyans Are Buying Cars
The demand for cars in Kenya dropped by 2.7% in 2024, marking the third year in a row that vehicle sales have fallen.
According to the Kenya Motor Industry Association (KMIA), sales by local car dealers decreased to 11,059 units in 2024, compared to 11,370 units sold in 2023. When regional exports were included, total sales reached 11,352 vehicles.
This was a significant drop from 2022, when 13,352 units were sold, showing how the challenging economic conditions in Kenya continue to take a toll on the market.
Industry experts have pointed to high borrowing costs as the main factor behind this decline. The rising interest rates in Kenya have made it increasingly difficult for both individuals and businesses to secure loans to purchase vehicles from the country’s 11 local dealers.
Many consumers rely on bank loans to afford new cars, but the higher cost of credit has strained their budgets.
“Interest rates went up by 20%, making it challenging for many customers to afford new vehicles,” said Rita Kavashe, Managing Director of Isuzu East Africa.
The motor vehicle industry is now calling for urgent measures to address the high cost of borrowing, which they believe is key to reversing the declining trend in car sales.
As domestic sales of new vehicles decline, many Kenyans have shifted their focus to second-hand car imports, which are more affordable compared to brand-new cars. This trend has led to a growing market for used vehicles as buyers seek alternatives that fit within their budgets.
In terms of vehicle categories, trucks, pickups, buses, and prime movers remained the top sellers. Specifically, 3,939 trucks, 3,133 pickups, 1,205 buses, and 522 prime movers were sold during the year.
A Closer Look at the Economic Impact
The decline in car sales reflects the broader economic challenges facing Kenya. The harsh economic climate contributed to a 4.8% drop in real GDP growth in the first half of 2024, down from 5.5% during the same period in 2023.
The Kenya National Bureau of Statistics (KNBS) highlighted in its Third Quarter Gross Domestic Product Report for 2024 that the country’s economy is now growing at its slowest pace in four years.
This slowdown has been attributed to weakened growth across multiple sectors, creating a ripple effect on the overall economy.
Even though Kenya’s inflation rate fell to a 14-year low of 2.7% in October, the cost of living remained stubbornly high, with commodity prices still elevated.
Despite the gloomy outlook, car dealers remain optimistic about the future. Many are hopeful that 2025 will bring some economic recovery, particularly in the construction industry, where demand for vehicles and raw materials is expected to rise.
This optimism is driven by the belief that improved economic conditions could restore purchasing power, allowing more Kenyans to afford new vehicles and reversing the current trend of declining sales.
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