The role of transportation and logistics in business has changed drastically in the previous twenty years and much more so in the last decade. The introduction of internet-based cab hailing software in 2010 wreaked havoc on the passenger transportation industry, making taxis more accessible to millions of consumers in Kenya.
This breakthrough opened up a slew of new prospects in the digital arena, financial services, insurance, and the hospitality industry, to name a few. Access to transportation solutions is the important term here. According to data collected in 2019, vehicle transportation is still the most popular mode of transportation, accounting for 62% of all trips.
The government's Big Four program continues to impact the automobile sector. Local assemblers have significantly benefited from vehicle leasing alternatives. The Big Four Agenda, which focuses mainly on housing, literacy, and healthcare, has allowed the automobile sector to offer commercial vehicles nationwide to meet various transportation demands.
Organizations relying on transportation for the execution of their daily operations are well aware of the financial commitment of keeping a vehicle fleet. However, if not adequately handled, the complexities of servicing, part replacement, accident repairs, performance tracking, and driver supervision can negatively influence the company’s expense sheet.
On the other hand, vehicle and machinery leasing allows organizations to obtain moveable assets easily. This emerging trend, which financial institutions are pushing in partnership with vehicle manufacturers, makes purchasing easier by removing the requirement of large deposits. But, as expected, the cash required for collateral and different types of guarantees will exhaust the organization’s working capital. In Kenya, vehicle leasing has changed the dynamics of the automobile industry and provided significant benefits to organizations that require vehicle fleets at bay.
A lease is a financial contract in which one party rents its assets to another party for a certain length of time in exchange for monthly payments. Regarding automobiles, leasing offers significant returns to lessees, such as lesser capital expenditure spanning over the years, acquisition of new and better vehicles, and finer financial model, as the expenses remain constant during the complete lease tenure.
Additionally, the lessee is relieved of vehicle management responsibilities, allowing them to center their attention on their business properly. The cooperation that enabled leasing has a direct and favorable impact on many sectors, including financial institutions like banks and insurance companies and vehicle and spare parts manufacturers. A sharp rise has been witnessed in the sales of locally manufactured vehicles. According to financial experts, leasing is the key factor behind the rise in automobile sales. This has also helped in creating many new jobs.
Kenyan-owned businesses that manufacture essential components of the vehicles benefit from the increase in demand for locally assembled and manufactured automobiles. However, the automotive industry had achieved a unique first in 2020, when it successfully provided leases to 100 buses for public transport purposes. The buses were acquired by Super Metro and Metro Trans SACCOs. The leasing agreement was facilitated by Co-op Bank Fleet Africa Leasing Ltd. Super Metro and Trans Metro SACCOs obtained hundred Isuzu NQR 33-seater buses against the price of Sh 533 million. For the PSV industry, this is Kenya's greatest fleet delivery.
Local vehicle manufacturers are optimistic that the economy will continue to improve. The sector will also benefit from Kenya Standard 1515, published in 2019, which prohibits the importation of fully built old trucks and buses weighing between 3 and 30 tons that may be assembled locally.
