Luxury car sales lift as economy recovers

Luxury car sales increased five per cent in the five months to May–almost matching the 6.5 per cent growth for the new vehicles industry in the period, reflecting renewed consumer confidence in tandem with expectations of economic growth.

The performance of the luxury segment, which sold 83 units up from 79 units a year earlier according to data from the Kenya Motor Industry, was driven by increased demand from private enterprises and wealthy individuals.

Players attributed the increased demand to the strong economic recovery that started last year, a move they say could cushion the industry from major cutbacks in government spending on luxury car brands like Mercedes, Range Rover, and BMW.

“There is increased demand from high net worth individuals and the private sector where directors and senior managers are buying more luxury cars,” said Roy Kyalo, a sales manager at Bavaria Auto Kenya, a fully-owned subsidiary of Simba Colt Motors.

The economy grew by 5.6 per cent last year, double the 2.6 per cent recorded in 2009. High fuel and commodity prices have however cast a dark cloud on growth this year, with Treasury downgrading growth forecast to between 3.5 and 4.5 per cent.

Government cut: The government has since 2009 stopped buying luxury cars that consume more fuel and are more expensive to maintain in a bid to cut its transport spend.

That decision saw sales of new luxury cars drop within its first year of implementation, forcing dealers to launch aggressive marketing targeting the private sector and wealthy individuals.

Last year, 204 units of luxury cars were sold, down from 218 units the year before. “Sales of new luxury cars slowed down due to lack of orders from the Government,” said Sanjiv Shah, the general manager of Mercedes saloon cars at DT Dobie said in an earlier interview.

He said government orders accounted for about 30 per cent of Mercedes sales in recent years—a percentage that analysts says resonated across other luxury brands. CMC Motors has been the biggest loser in the move by the government.

CMC, which sells Jaguar, Land Rover and Range Rover luxury car brands, sold 13 units in the five months to May, down from 33 units a year earlier. This reduced its marketshare to 20 per cent from 43 per cent. It however sold four Jaguar cars in the five months to May, signalling diversification of market.

Market leader DT Dobie that sells Mercedes cars grew its market share to 57 per cent from 40 per cent, entrenching its dominance in the segment. Bavaria Auto Kenya, the local franchise dealer of BMW brands, also expanded its marketshare to 23 per cent from 17 per cent.

General Motors East Africa (GMEA) which introduced the rugged Hummer luxury brand in Kenya a few years back has exited the segment after selling the last four units of the vehicle last year. Second hand car dealers however said concerns about high fuel prices have weighed down demand for luxury cars from their clients

“People are worried about buying the fuel guzzlers at a time when fuel prices are high,” said Ms Angela Mecha, a used-car marketer at Kenya Bazaar.