Kenyans are avoiding popular Toyota car models due to high prices, which has caused dealers to reduce imports of these vehicles.
According to car dealers, more Kenyans are opting for vehicles such as the Nissan Sylphy and Mazda, which are less expensive than popular models such as the Toyota Premio and RAV4, which have long been associated with middle-income earners.
According to Charles Munyori, secretary-general of the Kenya Auto Bazaar Association, Sylphy and Mazda Axela and CX5 are now popular among Kenyans.
Prices fluctuation
Toyota Premio now costs Sh2.2 million, up from Sh2 million in February, while RAV4 costs Sh3 million, up from Sh2.8 million four months ago.
The Nissan Sylphy (Blue Bird) now costs Sh1.5 million, and the Mazda Axela costs at least Sh1.6 million, making them affordable to the majority of Kenyans at a time when household budgets are being squeezed by rising commodity prices.
The popular brands, such as the Toyota Premio and RAV4, are no longer being purchased as frequently by Kenyans, who are increasingly switching to other makes and models. According to Mr Munyori, this transition has been brought about by the high price that these cars are currently selling in the market.
These brands are being viewed by consumers as the greatest alternatives to their chosen models because they are reasonably priced and of high quality.
With a market share of more than 80%, Japanese vehicles dominate Kenya’s used car industry.
Additionally, buyers think that Toyota vehicles have a higher resale value than cars from other manufacturers, like Nissan.
In reality, he claimed that few car dealerships import Premio and RAV4 models since they don’t sell well and eat up funds that would otherwise be used to import additional vehicles.
Lack of electronic chips and dollars
A lack of electronic chips in Japan, a lack of dollars in the country, and a weakening shilling against the dollar have all been blamed for the country’s growing auto costs.
Due to a lack of these semiconductors, which are utilized in electronic gadgets, the auto industry has reduced manufacturing.
Mr Munyori said that the lack of dollars has become so severe that it takes them at least three days to receive $20,000 from the banks.
Because banks have set restrictions on how many dollars can be purchased, some consumers find it challenging to obtain enough foreign currency to fulfil their obligations.
Industrialists have been forced to start looking for cash up front due to the pressure on supplier relationships and their ability to negotiate favourable rates in spot markets.
Some business owners have already been affected by shortages, which put their relationships with suppliers in danger and limit their ability to negotiate attractive prices in spot markets.
Others, on the other hand, have worked with their bankers to handle the shortages, but they worry that if the imbalance persists, they might be affected in the months to come.
It has become more expensive for importers to ship products in since the shilling’s value against the dollar has stayed low. The shilling has fallen to a historic low against the dollar after weakening to 117.06, signalling a further rise in import prices and a crisis of currency shortage.
Increased dollar demand from importers, especially those who deal in crude oil and goods, is blamed for the depreciation. Since the majority of the nation’s external debt is paid back in dollars, it is expected to raise car import prices and put pressure on debt payments.
Sales strategy
Toyota has implemented new tactics in Kenya through its dealership, Cfao Motors Kenya Limited, to increase sales of its new cars. One of these tactics is the use of the car trade-in model. According to the plan, a driver can give up their vehicle and pay extra money to get a new one.
The dealer will manage the trade-in model in conjunction with its affiliates that handle the sale of old cars. The practise is widespread among yards that buy used cars, which allow clients to turn in their cars and pay the extra money to get a new model with greater price and/or specs instead of keeping their old ones.
The Common Market for Eastern and Southern Africa (Comesa) Competition Commission has opened a formal investigation into the market pricing of new vehicles and spare parts as a result of the exorbitant prices of Toyota cars.