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Auto executives upbeat on 2018 growth prospects

Steve Umidha @steveumidha

Auto industry players remain positive on the fortunes of the sector and feel there is room for valuation gains despite a bleak performance in the last two years.

Driving the sentiment is the feeling that the government is finally giving ear to their concerns.

Structural reforms, and access to credit and markets stability will spur the much needed boost to drive growth in the sector, on the back of impressive start of business this  year.

Auto executives who spoke to People Daily expect business conditions to improve on the above mentioned for the remainder of the year, with manufacturing – a key pillar under the government’s Big Four – slightly edging out most sectors in optimism.

Major developments

Auto manufacturers such as Toyota Kenya, Nissan, Isuzu East Africa and Simba Corporation have already cast their investment nets wide, hoping to cash in on looming major developments expected in the industry.

“Last year was really a tough period for the industry, which declined by 23 per cent, it could be better this year and beyond but certainly not to the levels seen in 2015,” explains managing director of Toyota Kenya Arvinder Reel last week. His form is targeting a 4 per cent growth in unit sales from government’s leasing programme.

The year 2015 was the best year ever seen in the industry which saw close to 20,000 vehicles sold during that period, with growth coming mainly from the bus and truck segment.

Despite the ongoing industry changes, Arvinder says such a feat may not be achieved owing to competing factors such as Standard Gauge Railway (SGR) which he said is eating up truck and bus market previously controlled by vehicle manufacturers.

With the proposals to review capping on interest rate, Arvinder says the move, if successful, will see car companies reduce discounts and lift rates in an effort to attract the middle income earners – with a desire to own a new car.

Structural reforms

“As a result of elections, everyone held back investments last year, purchasing decisions were also held back. The interest rate capping also affected the industry, access to credit was a problem. But we are now seeing a lot of improvement including replacement of police vehicles being worked on by the government,” he said.

Structural reforms are underway in the industry, for instance, the government is working on a piece of new legislation that will support the growth of local auto assembly and component manufacturing.

The draft copy, Motor Vehicle Policy (MVP), is being prepared by the Ministry of Industrialisation in collaboration with auto manufacturers, auto vehicle makers, but continue to face hostility from car importers who insist they were not consulted when such plans were being mooted.

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