The average cost of imported cars in the first quarter dipped below Sh1 million for the first time in more than five years, indicating a shift by buyers towards budget vehicles.
Official data released Friday shows that the country shipped in 20,324 units at a cost of Sh19 billion between January-March, translating to an average of Sh934, 855 per car.
In a similar period last year, Kenya imported 19,433 vehicles, which was 4.5 percent fewer but at a steeper cost of Sh20.4 billion or an average of Sh1.04 million a car, according to the Kenya National Bureau of Statistics (KNBS).
Car prices tend to be costly in the first quarter as dealers have a longer period to sell the them in an economy that bars the import of vehicles older than eight years.
The 2017 quarter one car import bill translates to an average of Sh1.07 million per unit with the mean cost coming at Sh1.04 million in the first three months of 2016.
This indicates a shift towards low-priced imported cars among local buyers in an environment of slower economic growth punctuated by a credit squeeze from banks that slowed lending to customers they considered too risky in the legal regime where interests are capped by the State.
Increased demand for smaller cars by operators of taxi hailing firms like Uber and Bolt (previously Taxify) has also fuelled the shift towards budget cars, auto dealers say.
“More people are going for small budget cars,” said Charles Munyori, the secretary-general of Kenya Auto Bazaar Association, a lobby group for second-hand car dealers.
He added that reduced lending has hit the auto industry given most buyers rely on loans to acquire vehicles.
Private sector credit expanded by 4.9 percent in the year to April, the central bank said, well below the ideal growth rate of 12 percent to 15 percent.
The Treasury has proposed repealing the interest rates cap to boost access to credit.
Taxi-hailing firm Uber reckons that Kenya is its second biggest market in Africa after South Africa.
Besides Uber, other taxi hailing firms are Taxify, Little, ShareCab and Mondo Ride, underlining Kenya’s huge market status for these apps.
Kenya’s car market is dominated by low-priced second-hand imports from countries such as Japan.
Local car assemblers have been seeking to wrest market share from used car sellers who account for about 80 percent of vehicle sales.