Why new car sales are still low

In 2014, Uganda imported 41,500 motor vehicles, according to a report compiled by Uganda Motor Industry Association.
Out of these 2,500 were new with the rest of the composition, which stands at about 95 per cent being pre-used.

New motor vehicle importation, according to the report has had a dismal growth with sales figures stagnating or showing slight improvements since 2012.

In 2012, Uganda imported 1,949 new motor vehicles compared to 2,424 in 2013 and 2,146 last year.
The new vehicle market is dominated by Toyata with a market share of 46 per cent. It is followed by Mitsubish at 20 per cent, Nissan at 18 and Ford at 6 per cent.

The four brands including Toyota, Mitsubish, Nissan and Ford have a market composition of 90 per cent, leaving a 10 per cent stake to be shared between Tata at 3 per cent, Isuzu and Jeep at 2 per cent respectively.

Other brands including, Scania, Foton, Mercedes and Volkswagen each have a market share of 1 per cent respectively.

Who are the main clients
Majority of the new vehicles, according Robert Mudola, the Ford brand and sales manager, traded by CMC Motors, are consumed by government, which takes up more than 90 per cent of sold units.
Other consumers include non-government organisations, corporate firms, civil society and religious organisation.
A very tiny percentage of individuals, according to Mudola buy new cars.

“There are very few individuals who buy new vehicles, given that they are a bit expensive for the average car buyers,” Mudola says highlighting the lack of capacity to grow the market.

Consumption of new vehicles has since 2012 grown by less than 1 per cent with sales averaging at 2,173 units annually.
The figure does not compare well with Kenya, which, according to the Kenya National Bureau of Statistics sold about 10,422 units in 2013.

Unlike in Uganda where all new vehicles are imported, 5,456 out of the total number sold in Kenya are assembled within.
Tanzania sells more than 7,000 new vehicles annually, according to Tanzania Revenue Authority compared to Rwanda’s less than 1,000 units.

Explaining the low sales
The low sales, according to Moses Waiyaki, a Nairobi-based retail analyst could be attributed to the slow growth of the region’s middle class, “which leaves dealers with no choice but to pitch for government as their sole client”.

“Its only government which can afford that luxury, otherwise there are very few individuals in this region who can afford new cars, given their high prices,” he says.
“Look at the composition of new cars on the road in your country. I bet it can take you more than 30 minutes before you can see a new car. And chances are it is government owned,” he says via email.

Waiyaki’s argument is supported by Mudola, who says new motor vehicle dealers have struggled to grow sales numbers even when economic prospects are reading right.
However, “our projections, especially here (at CMC) are looking good given that we have an election year ahead which to us comes with good prospects”.

Usually, according to Mudola sales tend to be exciting, especially before and after elections.
“Elections years are the best for us given that people tend to have some disposable incomes, which we see in new car purchases,” he say, adding “but sales usually drop after elections”.

For instance, in 2011, which was an election year, new vehicle dealers sold 2,633 units but slide to 1949 units in 2012.
Elections periods in Uganda, according to Uganda Motor Industry Association come with high prospects of rising sales.
“With the elections in early 2016 high sales are expected and drastic drop thereafter,” the Uganda Motor Industry Association report reads in part.

However, beyond the elections there are good prospects for the industry as the region seeks measures through which it can limit the use of pre-used motor vehicles within East Africa.
Last year, while conducting a ministerial meeting in Arusha, Tanzania the East African Business Council proposed that measures be put in place through which the region could have a phased ban on the use of pre-used vehicles given their adverse effect on health and the environment.

In Kenya, the government instituted a ban on all pre-used vehicle importations that are older than 10 years.
However such a ban has not been instituted here in Uganda with road users having to put up with vehicles that are as old as 20 years.

And this Mudola says is a humongous challenge for new car dealers as data indicates that pre-used vehicles are bought much more compared to new ones.

However, “new taxes imposed on second hand vehicles are forcing a change in trends and Uganda Motor Industry Association projects that sales of new vehicles is likely to increase in the next 12 months,” Mudola says.

Government, in the 2015/16 budget approved a tax levy on importers of 50 per cent levy of the Cost Insurance and Freight (CIF) value of cars older than 10 years.

Similarly dealers importing motor vehicles of between five to 10 years pay a levy of 35 per cent of the value.

Specialised services

Most of the new cars dealers have put up facilities that are used for specialised repair services. For instance, at CMC there is a Quick Lane service point where repair services are offered to all car brands sold by the company.

Other dealers including Toyota, Mercedes Benz and Nissan, among others also offer repair services and spare parts for brands that they sell.

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