Why wealthy Kenyans are losing appetite for luxury vehicles
Wealthy Kenyans have cut orders for luxury cars like Porsche, Range Rover and Jaguar by 43 percent in the nine months to September, and this has led to a sharp decline in the unit sales of new vehicles generally.
Data from the Kenya Motor Industry (KMI) Association shows that unit sales of all the high-end brands fell to 112 in the review period compared to 198 the year before. The slump was much deeper than the 6.5 percent sales drop in the overall new vehicle market, which sold 10,081 units in the same period.
Reduced demand for the high-end cars, whose prices can top the Sh20 million mark, has been linked to a mix of factors, including franchise and supply chain disruptions in the industry as well as scrutiny from agencies like the Kenya Revenue Authority (KRA).
Car dealers have said that increased government scrutiny of luxury spending and large financial transactions have discouraged buyers of top-end cars.
“Tax authorities are interested in people buying luxury cars. The option of paying for cars using cash is also now closed,” said a dealer who requested not to be named.
Car registration details are being used to smoke out individuals who are driving high-end vehicles like BMW, Mercedes, Porsche and Land Rover, but have little to show in terms of taxes remitted.
The KRA has set out to raise more revenues from individuals whose lifestyles suggest they have higher incomes than what their tax payments indicate.
There have also been stockouts of several luxury car models following global manufacturers’ production decisions and changes in the ownership of local franchises. Porsches and Bentleys, for instance, were out of stock for four months until May in what the local dealerships attributed to delays in sourcing the 2019 models. Unit sales of Porsche dropped to 22 units, or 46.3 percent, in the review period from 41 a year earlier while those of Bentley declined to three from four.
The new model of the fastest-selling Porsche Cayenne was recently introduced at a price of about Sh12 million, inclusive of taxes. Porsches and Bentleys are sold by separate dealerships whose ultimate parent company is the logistics firm, Multiple Group.
BMW sales also suffered after the German car franchise was transferred from Simba Corporation to rival Inchcape Kenya early this year. BMW orders dropped to eight from 21, reflecting a 69 percent drop. Land Rover sales, which include those of Range Rover models, dropped by half to 34 units, a drop that saw it cede its lead of the luxury car market to Mercedes.
Mercedes unit sales dropped marginally to 38 units from 42. It has previously benefited from government orders in an environment that has seen the State opt for leasing over outright purchases. Dealer DT Dobie could get a major sales boost later this year considering that the Judiciary has published plans to buy 121 Mercedes cars for judges and other staff.
During the review period, Jaguar suffered deep cuts, posting seven unit sales compared 21 in a similar period a year earlier.
Most dealers depend on orders from private companies and wealthy individuals, having weaned themselves off demand from government purchases after it adopted austerity measures. DT Dobie, however, continues to benefit from State orders.