Pending bills weigh in on auto market

Pending bills by the national and county governments have sapped auto sales in five months to May 2023 and a recovery will likely be slow, threatening job security.

Coupled with currency fluctuations and high-interest rates, auto executives are particularly concerned that continued inability by both sets of governments has already seen most of them ‘write off’ the year.

“This year is gone,” offered Dinesh Kotecha, the Group CEO of Simba Corporation – sellers of Proton vehicle brands, Mitsubishi, Fuso, Mahindra, and Same Tractors.

Low performance

In a telephone interview yesterday, Kotecha said the mounting pending bills and high-interest rates are the most pressing and lingering holdups, likely to see the industry perform dismally this year.

Since the beginning of 2020, the Kenya shilling has lost approximately 25 per cent of its value against the US dollar.

By November last year, the currency was trading at around Sh117 against the dollar – rising to over Sh140 this year. The shilling closed Monday trading at Sh138.45 against the dollar.

“There is still a problem out there and until we are able to see some sort of stabilisation in terms of interest rates and exchange rates, we will end the year in the same way we did in 2022,” said Kotecha, who also predicted reduced pent-up demand from individual buyers.

Arvinder Reel, the managing director of CFAO Group which sells Toyota vehicles and Hino trucks, shares similar worries and is “hoping to do at least what we did last year.”

“Government is the largest buyer and with these challenges, we have already seen the market shrink by 13 per cent. And with high taxation we have also seen disposable income of would-be buyers limited as a result,” said Reel in an interview yesterday.

In the short term, both agree that fleet sales are not a major concern for automakers who are now focused on ramping up production to beef up lacklustre dealer inventories which have existed since the onset of Covid-19.

County government

Figures by the Controller of Budget (CoB), Margaret Nyakango shows that National and County Governments’ unpaid bills stood at Sh637.91 billion as of February 2023.

As of December, last year, ministries had pending bills of Sh80.2 billion, State co-operations had pending bills worth Sh400.6 billion, while counties had Sh157.91 worth of pending bills

Figures by Kenya Motor Industry Association (KMIA) show that year–on–year vehicle sales for four months to April this year hit just 3,778 total units. The industry sold a total of 2,758 units by the end of March, which was 445 units less than it managed in a similar period last year.