Boda boda business on the wane as lenders shy away

The motorcycle business has dropped significantly on the back of the prevailing high cost of living and as financial institutions scale back lending to households.

Automotive and engineering equipment supplier Car and General says the cutting of lending by financiers has impacted the units the firm manufactures and sells, with many of its potential customers no longer able to afford the crucial means of transport.

This emerged during the launch of its new motorcycle model dubbed; The TVS HLX 125 bike with a five-gear transmission that provides more power and speed.

In its 2023 financial report, the firm, which is the largest importer and supplier of motorcycles in Kenya, says its two-wheeler (boda boda) business in the country saw the volumes of its overall market drop by almost 77 per cent.

“This was as a result of unit price increases due to the devaluation, the increase in the price of fuel and the general inflationary environment, which resulted in a lack of profitability for boda boda riders,” says Car and General in the report for the period ended December 2023.

Dollar shortage

The supplier says the business environment was extremely difficult during the review period occasioned by a debilitating dollar shortage, leading to forex losses amounting to Sh645 million.

The firm has also projected the business uncertainty to persist this year in the wake of the current global geopolitical challenges in the Middle East.

“Volumes in our two-wheeler business in Kenya dropped significantly whilst three-wheeler (tuk-tuk) and consumable sales remained stable. In Tanzania, volumes of two-wheeler and three-wheeler sales grew,” the report reads in part.

According to Managing Director David Chesoni, the cases of repossession of motorbikes by lenders due to loan defaults rose during the review period.  

“We thank financiers for the impact they have created in the economy by enabling low-income Kenyans to own motorcycles,” he said but urged them to review the high interest of lending to the market segment due to the high risk associated with it.  

Despite complaints about high interest rates and repossession cases, Mr Chesoni, said many individuals have benefited from motorbike financing.

This is even cases of motorbike thefts become rampant across the country, with creditors and operators blaming each other.

Boda boda operators claim bikes are repossessed just as they are about to clear their loans. Creditors, on the other hand, accuse some operators of dismantling bikes and filing fraudulent insurance claims.

A recent report by boda boda financier Watu Credit revealed that a total of 22,826 bike theft cases were reported to the firm between January 2022 and January 2024.

“Through coordinated efforts between Watu’s internal teams and security agencies, 11,877 of these bikes have been recovered,” said the firm in the report.

An additional 7,737 cases were forwarded to insurance for processing, with 2,646 claims settled and 5,091 still under review.

Notably, 3,212 cases were classified as “special cases,” where investigations found the bikes had been impounded by police or hidden, rather than stolen.

In 2022 alone, 12,800 bikes were reported stolen, with the number falling to 9,500 in 2023. And as of August 2024, 503 motorbikes were reported stolen.

Cheaper financing

Creditors argue that the rise in boda boda thefts is largely driven by insecurity across the country.

“We need to rethink how we can make it possible for boda boda operators to access cheaper financing. Banks are not giving boda bodas loans,” Car & General boss Mr Chesoni said, urging operators to join Saccos and guarantee each other for better discounts.

Mr Chesoni also noted that the economic difficulties are pushing boda boda users to seek cheaper modes of transport. “Initially, boda bodas would cover 120 kilometres per day, but the average mileage today is down to 80–90 kilometres,” he noted, adding that this signals a drop in operators’ income. Despite these challenges, the demand for motorcycles in the country continues to grow.

According to data from the Kenya National Bureau of Statistics (KNBS), the country imported a record 338,700 motorbikes between April and June 2023, an increase of about 1,500 per cent compared to the 22,800 motorbikes imported in the first quarter of 2023.

This spike surpassed the total number of motorbikes imported in all of 2022.

Car & General has launched new bikes with tubeless tyres, which allow the bikes to travel an extra distance after a puncture.

“This launch is in direct response to what our customers have been asking for,” Mr Chesoni said. He expressed confidence in the uptake of the new TVS motorcycles, which will be priced at Sh168,000 and are already available across the country.

Mr Chesoni lauded the government for supporting local assembly, noting that 14 parts of the new model are manufactured locally in Nakuru.

This initiative has created more jobs. So far, about 700,000 units of the newly launched bikes are on pre-order.

“Local assembly is already happening in Nakuru,” Mr Chesoni said, adding that efforts to locally assemble three-wheelers are also underway as the company transitions to electric vehicles.

The new model, he said, emphasises durability, minimal maintenance requirements, superior engine, excellent mileage, and the ability to perform well across various terrains.

“These features cater to the evolving mobility needs of boda boda operators and delivery services, backed by a wide service network of trained mechanics and available spare parts,” said Mr Chesoni.