The car industry in Uganda heavily relies on imported used cars from other countries, making it vulnerable to external factors that affect other nations. However, internal factors such as the regulations set by the Uganda Revenue Authority (URA) and inflation also have a significant impact on the affordability of cars for Ugandan customers. In this article, we will discuss the internal factors that will influence Uganda's car market in 2023.
Last year, the URA announced a ban on importing cars older than nine years, but due to global inflation and economic trend, the regulation for cars up to 13 years old got revised. This means that older cars must be registered at the port of entry, and it will transform Uganda's automotive industry in the following ways:
New Car Models
Newer car models will become more prevalent on the roads as the regulation means importing cars manufactured in 2010 and later.
Foreign Car Purchasing
Customers purchasing foreign-used cars should expect to pay more money for better quality cars with less wear and tear since they will be buying more recent models.
Local Used Car Demand
Thirdly, customers will flock to the locally-used car market due to the hope of getting better deals. Locally-used cars usually cost less than the foreign-used ones sold in car bonds, and this trend is expected to increase in 2023.
Inflation and Interest Rates
Inflation and rising interest rates mean that financing older or used cars will be more expensive than newer car models, where the customer's contribution is usually lower. However, more players are projected to enter the car finance market, providing customers with more options and the likelihood to negotiate better rates.
Informed Buyers
Car buyers today are more informed and expect convenience and transparency when shopping for vehicles. This has led to a shift towards online platforms, such as Autochek's platform, to buy their next car. The buying experience is expected to be more customer-centric, providing better options for car buyers.
Buyers Segmentation
Millennials were the most buyers who purchased cars in Uganda in 2022, while Gen X was the second chunk, followed by Gen Z, and Baby Boomers. We expect to see more car sales from young people in the country as their income levels continue to rise. Toyota leads with a 49% market share, followed by other brands based on customer preferences.
External Factors
Moving beyond Uganda's borders, external factors such as supply chain challenges have affected the global automotive industry. The easing of these challenges is starting to drive down the cost of used cars which peaked in mid-2022. However, prices are not expected to go back to pre-pandemic levels.
Conclusion
To register better sales in 2023, dealers and players in the automotive value chain need to develop innovative approaches to business. The car market is not expected to return to normal until 2026, and players in the industry need to adapt to cope with the challenges they faced last year.
