Why vehicle assemblers are joining car trade-in business
Kenya’s motor vehicle assemblers are now venturing into car trade-in business to shore up new vehicle sales amid competition from used car imports. Trade-in refers to the exchange of a used vehicle, in part payment for a newer model.
The latest entrant into the business is Toyota Kenya, which last month re-branded to the Corporation for Africa and Overseas (Cfao) Motors Kenya Limited. The new outfit will exclusively distribute Toyota, Suzuki, Hino trucks and Yamaha motorcycles.
Arvinder Reel, Cfao Managing director, who spoke to Business Hub said they have formed a certified, used car sale portfolio to start selling trade-in certified pre-owned Toyota’s before adding other brands should opportunities arise.
“As part of our expansion strategy, we will now offer quality used cars under the trade name Automark as well as parts offering through Winparts,”said Reel.
The certification puts Cfao in an enviable position, becoming the first assembler in Kenya to sell trade-in vehicles under a certified sticker, similar to second-hand imports mainly from Japan under international brands like Autorec.
In conformity with international standards, Cfao will be required to recondition the trade-in vehicles by fitting new tyres and new battery, as well as replacing all defective parts. Engines and upholstery will also be cleaned and generally, the condition improved. The type of reconditioning work will, however, depend on the new owners choice, with Cfao carrying out any work to suit the new owner’s requirements.
Dealer network
Charles Munyori, Kenya Auto-bazaar Association Secretary General reckons that through car trade-in, Kenyan vehicle assemblers have created their own second hand car shops. He said unlike second hand car importers who do not discriminate between brands during trade-ins, the assemblers only deal with their products.
“Trade-in by the Kenyan assemblers has been there for a while. What is happening is that the vehicle assemblers are creating their own second hand car shops. Isuzu has been doing it for a while now but only accepts exchange of their brands,”said Munyoryi. Unlike Cfao who will use Automark, Isuzu East Africa Managing Director Rita Kavashe said the automaker uses its wide dealer network to control the quality of trade-ins for its trucks and pick-ups.
The company has signed several vehicle lease agreements with different institutions for a maximum of five years, allowing them to get brand new vehicles maintained by the automaker without any upfront cash outlay.
“This way, we are able to re-sell the vehicle to the secondary market and fetch a little money,” said Kavashe.
The Cfao venture comes amidst stiff competition from imported second hand cars, with the formal industry just emerging from the economic shocks of the Covid-19 pandemic. Munyori said an estimated 78,000 second hand car units were imported last year.
