- Buy and sell successfully!

The used car market remained buoyant in 2011 recording higher growth in sales than new ones as companies and individuals prefer the cheaper second hand models.

Auto dealers said the price gap between new and used cars has continued to widen—pushing most buyers to the cheaper segment of the market and piling pressure on sellers of new models such as Toyota, CMC Motors, and General Motors East Africa.

Kenya National Bureau of Statistics data show that sale of used cars stood at 65,445 units compared to 58,420 units the previous year, reflecting a 12 per cent growth.

This come at a time when the new cars market has recorded sales growth of 7.4 per cent to 11,050 units, which was lower than the 2008 sales of 13,135 units.

“Mitumba vehicles (used cars) are imported without accurate valuation and we have been pushing for an increase in import tax,” said General Motors East Africa chief executive Bill Lay in an earlier interview.

“Importation has nearly killed the local assembly industry. The uneven playing field results from undervalued vehicles,” said Mr Lay, who is also the chairman of the Motor Vehicles Assemblers.

The ratio of new cars to used ones has dropped from 21 per cent in 2006 to 14 per cent last year.

A new Toyota Rav 4, for instance, costs about Sh3 million, according to the Kenya Motor Industry (KMI) data, with a second hand model going for about Sh1.2 million.

Saloon cars recorded the highest sales of 43,649 units, followed by vans (6, 975) and lorries (4, 924) — a pointer that the market is driven by individual consumers as companies and the government have preferred to buy new cars.

Buyers of new cars have cut their order books as the corporate sector continues with cost cutting measures.

The Government, a major buyer, has also gone slow on car orders as it rolls out plans to lease from private investors.

This has sparked intense competition among dealers including Simba Colt, General Motors East Africa, and Toyota, a development that saw some players such lose market share.

The KMI data shows that CMC’s market share dropped to 13.7 per cent last year, from 15.4 per cent in 2009 — a sign that the firm failed to sell cars at a faster pace than some of its peers such as GMEA, which grew market share to 26.2 per cent from 20 per cent in the period under review.

Dealers with a larger presence in the heavy commercial vehicles such as GMEA managed to record growth, a move that has seen the rest of the industry focus attention on the segment.

By David Mugwe

Source: Business Daily (Nation Media Group)