12 January 2012

Kenya: Japan Quake Lifts Sales of Small Car Dealers

Small dealers in new vehicles recorded a larger market share growth in 2011 at the expense of rivals whose supplies were hit by the March earthquake in Japan--the source of most car imports.

Data from the Kenya Motor Industry Association (KMI) shows that small car dealers like Tata Africa, Hyundai, Subaru and Kenya Grange Vehicle Industries increased their market share to 10 per cent from 6.5 per cent in 2010.

The larger auto dealers such as General Motors East Africa (GMEA), Toyota Kenya and Simba Colt recorded 6.1 per cent growth in car sales, in 2011, compared to their smaller rivals who posted a 69 per cent growth in the year that the new vehicle market sales grew 10 per cent.

Executives in the car market attribute this growth to the Japan earthquake which hurt vehicle supplies to large dealers, benefiting small dealers in the heavy commercial trucks market such as Tata Africa and Kenya Grange Vehicle Industries.

"Small dealers mainly in the commercial trucks market recorded significant market share gains as large dealers suffered from the Japan earthquake," said Naresh Leekha, the chairman of KMI and executive director of Tata Africa.

The rising cost of cars due to the soft shilling which inflated car prices by about 25 per cent in the past year, also led buyers to turn to cheaper vehicles, especially those from low-cost producers such as Tata--whose sales increased to 706 units from 406.

The larger dealers sold 10,966 cars compared to 1, 219 units up from 706 for the small dealers, with the bulk of the sales being trucks, a market that Tata has a heavy presence.

Other smaller operators who gained market share include Kenya Grange, dealers in Scania trucks and buses, which sold 252 units up from 160 units in 2009. China's Bei Ben trucks increased sales to 165 units from 56 units in the year under review.

Simba Colt which deals in Mitsubishi trucks saw its overall market share drop to 15 per cent last year down from 18.4 per cent the year before. Sales of its flagship Mitsubishi dropped to 1,783 units from 2,122.

"Our sales were negatively affected by the Japan earthquake and that is why we lost market share," said Mehul Sachdev, the marketing manager at Simba Colt.

Nissan Diesel Trucks that are sold DT Dobie also suffered as it sales dropped to 259 units from 428, but GM's Isuzu sold 3, 130 units last year compared to 2, 971 helped by its local assembly plant that softened the impact of the Japanese quake on its sales.

While GMEA retained its position as the largest dealer in the country with 25 per cent market share, it was also affected by the earthquake, with its share dropping from 26.2 per cent in 2010.

GMEA which sells Isuzu brand of buses and trucks suffered from inadequate stocks of the vehicles in the first half of last year, delaying advanced sale orders from customers, according to its CEO Rita Kavashe.

CMC Motors, which sells the widest type and brand of vehicles, recorded a marginal drop in market share to 13 per cent from 13.7 per cent. The dealer relies heavily on demand from the government which is cutting back its purchase of vehicles by billions of shillings in the medium term.

The second largest dealer, Toyota Kenya, gained slightly with a market share of 24 per cent from 23.2 per cent.

DT Dobie which sells Nissan pick-ups and Mercedes trucks and salon cars also recorded marginal gains with a 13 per cent market share from 12.2 per cent.

Small dealers are keen on grabbing a larger share of the lucrative and highest-selling commercial trucks market driven by demand from the construction, agriculture, and the growing cross-border trade in the East African Common Market.

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