Demand for new automobile in Kenya

Abstract

The automobile industry is an important sector In many modern economies. It plays a key role in creation on employment, a major factor in the oalance of payments in the producing country to mention but a few.

Automobile ownership is now on the increase due to its many uses and might soon fall in the category of a necessity. A majority of Kenyans rely on automobile for their day to day activities ranging from commuting to work to small business operations. In Kenya this sector has been threatened due to a

I number of factors. The aim of this study is to identify the determinants of demand for new automobile in Kenya and policy implications.

The parameters of the model were estimated using time series data for the period 1970-2000. The determinant s discussed in this paper were tested in a model and their significance tested. The results of this study indicate that demand for new cars is determined by personal disposable income, Stock of automobile, import prices of cars, cost of credit and import duty.

Most of the variables were found to be consistent with theory. Those that were not had convincing r'ecsons to support them. For any meaningful policies the government and other stakeholders in this sector need to consider these factors seriously .