Motor vehicle inquiries remain high but sales are on a declining trend

Ugandan population has always treasured owning motor vehicles because of a poor transport network. But the actual sales in the past few months have been on a decline amidst continued growth in inquiries. Autochek Uganda’s Country Manager, Jacob Muddu, in an interview with The Independent shares some insights about the country’s motor industry.

Uganda’s economy like the rest of the world has been battered by the effects of the coronavirus pandemic and the geopolitical wars, especially in the ongoing Russia-Ukraine war. How has this impacted the motor industry in Uganda?

Uganda’s automotive industry is heavily dependent on imported cars from Asia and Europe. The coronavirus pandemic and the Russia-Ukraine war caused a disruption in the global supply chain and a slowdown in the production of new cars due to the lack of availability of chips. These disruptions led to a decline in the production of new cars and in turn increased the demand for used cars. Since our automotive industry is dependent on foreign-used cars, high demand coupled with low supply has driven up the prices of these cars by an estimated 17%. This has slowed down the growth of Uganda’s automotive industry which started to recover in 2019.

What is your assessment of the demand for cars in this country at the moment compared to like three or four years back?

Demand for cars remains high among many Ugandans since cars are no longer considered a luxury but a necessity. Our data and customer interactions reveal that there is a month-on-month increase in the number of people inquiring about car ownership through our financing service. This demonstrates consistent demand growth even though the number of cars sold annually has been on a consistent decline. The fall in sales can be attributed to the skyrocketing prices of cars caused by supply chain disruptions, shortage of chips, and high taxes, mainly driven by the COVID-19 pandemic and the Russian-Ukrainian war.

Which cars are in high demand compared to others in this market? What are the reasons behind that trend?

With the current economic situation, customers are demanding cars with low fuel consumption and maintenance. These are Toyota Sienta, Toyota Premio, Toyota Fielder, Toyota Rumion, Toyota
RAV4, Toyota Wish, Subaru Impreza, Subaru Forester, Toyota Harrier, and the Toyota Hiace Van (Drone)

Last month, you partnered with Stanbic Bank to enable prospective car owners to access car financing. How does this initiative work?

Our partnership with Stanbic Bank offers car buyers multiple financing options to acquire the vehicles they desire. Under the partnership, customers get fully inspected cars from Autochek and receive financing from Stanbic Bank.

How different is this Stanbic Bank car financing compared to similar car financing options provided by other financial institutions?

The key difference I believe lies in the benefit that Stanbic Bank’s car financing offers. With Stanbic Bank, customers have access to a wide range of inspected highquality vehicles available on the Autochek Platform. Unlike other financing options, we help customers look for the car, inspect it and continue to maintain it for the duration of the loan to give customers a piece of mind.

How are you helping local businesses grow through vehicle financing?

Local businesses support our economy and create 90% of the jobs. During the COVID-19 lockdowns, businesses highly adopted delivery to meet their customers where they were– at home which helped them to drive up sales. Delivery is now a norm for all businesses and their customers expect it. Through our vehicle finance services, we are supporting these businesses to boost their delivery capacity without draining their working capital on a huge vehicle investment. We believe that this allows them to reach even more customers and double their profits.

The flexible payment plan allows small businesses to remain liquid and channel resources to activities that enable them to meet their customers’ expectations.

Every business initiative usually has returns and I believe by Autocheck Uganda connecting buyers to car sellers need to be compensated. How does Autocheck Uganda earn its income?

True, every business solves a problem for a reward. At Autochek, our reward comes from the interest levied on the loan, however, the cars are sold at the market price same as what one would find at the car bond.

How do you deal with customers who would like to pay for the car in cash but access the car of their choice through your company possibly because of the indicated prices? Does the car price quoted on your website drop? If yes, by what margin?

In addition to financing, we also do outright purchases commonly referred to as cash purchases. The price on our website is the market price provided by the dealers and is the same price one would find if they visited the car bond. We usually engage in negotiations with the dealers to discount the cars for our customers. The margins vary based on the car type and the dealer.

Over the past few years, demand for hybrid cars has been on the increase globally. How is the situation locally? What are the key drivers for the trend?

Hybrid cars are becoming popular, with some vehicle models released with purely hybrid options. Locally, we see low adoption of hybrids due to a lack of availability. However, recently, there has been increased interest in them mainly because of their low fuel consumption, high tech, and consumers’ increased awareness of the negative effects of climate change.

Why should prospective car owners consider hybrid cars compared to traditional cars that depend on fossil fuel?

The majority of car buyers in Uganda prefer fuel-efficient cars and hybrid cars offer the best fuel economy by automatically switching between fuel and electric energy.

In addition to this, they have a longer maintenance cycle compared to traditional fuel cars because of reduced wear and tear of their parts and this comes with low maintenance costs.

With hybrid cars, buyers are safe from the government ban on cars older than 15 years since the majority of them are released starting from 2013.

What is your view about the government’s decision to ban the importation of old vehicles beyond 15 years?

Although limiting for most car buyers since the recent cars are expensive, the ban on the importation of cars older than 15 years protects consumers from purchasing extremely old and faulty cars. More recent cars have better safety features with improved technology to curb carbon emissions which protects our environment and assists drivers to have better driving experiences. However, for financially constrained customers, we are here to help them acquire the cars of their choice through Autochek Financial Services

What are some challenges, if any, that Uganda’s motor industry faces and how can this be addressed?

There are plenty of challenges native to our country but the most pressing ones are the same affecting the global automotive industry. These challenges can be summarized as disruption in the global supply chain leading to high transportation costs, low availability of used-car stock, low production of new cars– where we have seen major manufacturers cutting their production projections, and absence of new car dealerships from a number of manufacturers. Overall, this has driven up the cost of operation and in turn, the price of cars leading to low sales even as demand is high.

What is the future outlook for motor vehicle demands in the next few years in Uganda?

It is currently very uncertain but we are sure of seeing an increase in demand for cars and we believe that increased access to vehicle financing will play a key role. Cars are now a necessity, especially with the state of our public transport. So many people dream of owning a car to have an increased sense of independence.

Therefore we predict an increase in vehicle demand and we are well-positioned to empower customers with financing to acquire the cars they desire.

We also look forward to having more car manufacturers set up dealerships in the country and perhaps open assembly plants to have some select new cars produced in the country which will reduce the cost of new cars in the country. Perhaps as a country, we should consider reducing the number of years for the cars that come in, for most manufacturers every 5 years they make improvements to their models hence reducing emissions, improving fuel efficiency, and adding more features for a better driver experience.

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