Business

Wealthy Kenyans Are Taking Luxury Cars Out of Showrooms For Fun

The Porsche dealership in Nairobi. The Kenya Motor Vehicle Industry Association statistics show demand for luxury cars was up in H1 2020.

Orders for luxury cars like BMW increased by 14.5% in the first six months ended June, signalling that not every Kenyan is feeling the economic pinch brought about by the COVID-19 pandemic.

Data from the Kenya Motor Vehicle Industry Association (KMI) shows that Mercedes and BMW drove the rise in orders for high-end cars to 79 units in the review period compared to 69 units in 2019.

The growth of demand for luxury cars was larger than that of the entire vehicle market that saw orders fall 26.4 percent to 4,628 units from 6,294 units.

This points to increased spending by wealthy households at a time when a vast majority of Kenyans have adopted a conservative approach due to uncertainty.

Since the country reported its first COVID-19 case in the country, many Kenyans have lost their jobs and others sent on unpaid leave while many more are expected to lose their source of livelihoods in the coming months.

The government expects economic growth to drop to below 2.5 percent this year, down from a pre-pandemic forecast of more than six percent.

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Prices of most new luxury cars range from Ksh6 million to Ksh20 million, with a few models crossing the Ksh30 million mark.

Orders for Mercedes cars were the strongest in the six-month period, rising to 37 from 24 while those for BMW models rose to 14 from three.

There were no Jaguar sales in the review period, compared to seven the year before.

Land Rover sales, including Range Rovers, dropped to 18 from 22 while orders for Bentleys fell to one from three. Porsche sales also declined to nine from 10.

This shows that this class of Kenyans have reserves of disposable income that they can toy with even as other Kenyans continue to wonder what tomorrow holds for them.

The mainstream commercial vehicle market was subdued during the period under review due to the state of the larger economy.

“The year 2020 started well, as the industry built on the momentum from 2019. However, there was a drastic drop from March to May due to the Covid-19 effect on the economy,” Arvinder Reel, the managing director of Toyota Kenya, said in a recent interview.

Inter-county movement restrictions and closure of schools negatively impacted commercial vehicle sales.

“Overall, sales of commercial vehicles (pickups, 14-seater minibuses, trucks and buses) contributes 50 per cent of total new vehicles market,” Mr Reel said.

“Unfortunately, this is the segment that has been the most affected due to the restriction of travel/movement and lockdowns of the major towns.”

The travel restrictions, which were eased on July 7, had hurt earnings of cargo transporters and public service operators and left them with excess capacity, reducing their need to expand their fleets.

Average monthly sales in the first half of the year dropped to 771 units compared to 1,049 units a year earlier.

Sales fell to their lowest at 568 units in May and then rose to 762 units in June.

“We are optimistic that this positive trend will continue as the national government puts in place guidelines that will help in re-opening the economy,” Mr Reel said.

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