Motor industry mulls local used car market

DEALERS are calling for the establishment of a local second-hand vehicle market to compete with imported second-hand vehicles estimated at 42 000 as of August this year.

BY TATIRA ZWINOIRA

In 2015, dealers placed the number of imported vehicles at about 64 000, a figure that is expected to go down due to increased liquidity challenges.

The increased number of imported second- hand vehicles pulled down the sales figures of new vehicles quite significantly from an average of 4 000 in 2014 to 3 633 in 2015.

It is because of this that dealers are now calling for a second-hand vehicle market in Zimbabwe.

Motor Industry Association of Zimbabwe president Luckson Gwara told Standardbusiness recently that in order for a second-hand vehicle market to work in Zimbabwe, partnerships needed to be formed between local dealers and established brands.

“Whether we get Chinese brands or whatever brands we get, we need to be producing that brand in big volumes. We must be able to identify a vehicle that can be sold locally at a reasonable price and compete with probably the second-hand vehicles that are coming into the market. In five years’ time, we will begin to have second-hand vehicles of our own. From a brand new car in Zimbabwe, it becomes second-hand and goes into another market,” Gwara said.

“A plant has to be set up, investment in terms of robotics has to be put in place and justify that kind of investment. We need to be able to say we have a relationship with somebody who comes in and puts in that kind of money and are happy that their investment is going to yield results,” he said.

Gwara said imported vehicles had remained popular due to affordability and economic constraints but the demand would see a slowdown due to economic forces.

The slowdown of demand for imported vehicles also comes as they have been classified under the non-priority list gazetted by the Reserve Bank of Zimbabwe in May 2016.

As of July 2016, the total number of new vehicles sold was 2 089, a drop of 5% from the 2 202 recorded over the same period last year.

Dealers cited the depressed liquidity and growing demand for imported vehicles as reasons for this drop.

Nissan Clover Leaf Motors managing director Stanford Sibanda said it made a lot of sense to create a second-hand vehicle market to compete with imported vehicles, but said there were challenges.

“It makes a lot of sense, but the problem in Zimbabwe is that a second-hand car market comes from new vehicles which we don’t have. In other words, you sell the vehicle as new today and that buyer sells that vehicle after say five years, disposing it into the second-hand market as a decent used vehicle,” Sibanda said.

“But, once again, because of economic challenges [in Zimbabwe] when people buy a new vehicle, they do not stop using it after five years anymore; they would rather use it for 10 years. So after 10 years, it is not a good second-hand vehicle, meaning that you do not have a second-hand car market.”

He said financing mechanisms were unaffordable due to high interest rates ranging from 10% to 15% which should be revised downwards to at least 5% to make it viable.

On average, the second-hand cars that are imported into Zimbabwe are five years old or more, which would have been discarded in the market of origin. They come from mainly Japan, South Korea, Singapore and Britain.

Despite passenger vehicles being classified under the non-priority list coupled with a depressed liquidity, the volume of imported vehicles remains high.

In July this year, the Zimbabwe Revenue Authority launched a probe to ascertain whether imported vehicles were in accordance with the law. Imported vehicles are said to be included in an estimated $1 billion being lost to smuggling.

The probe was backed by findings from the Zimbabwe National Road Administration that put the country’s vehicle population at 1,2 million as at June 2016, up from about 800 000 in 2014.

In developed countries, vehicles that turn two to five years old are taken back to the dealership.

“What has happened in Zimbabwe over the past few years in terms of economic challenges faced by would-be vehicle buyers is that the majority of Zimbabweans are buying used vehicles which are cheaper. They have been buying these imported vehicles from Asia and the United Kingdom because they cannot afford new vehicles,” Sibanda said.

“Our market has essentially disappeared due to affordability issues because most of our potential customers are buying imported vehicles. Disposable incomes have come down so much that these would-be drivers cannot afford a new car. The market for our new vehicles has nearly disappeared due to the bad performing economy.”

Charges on second-hand imports constitute a whopping 90% of the total buying price of the vehicle. These include customs duty at 40%, surtax 35% (on vehicles older than five years), and value added tax of 15%.

CFAO managing director Marius Prinsloo said a second-hand vehicle market was essential in order to have a vibrant vehicle market in the country.

Last year, international car export companies Be Forward and SBT Japan set up local offices to meet the growing demand and help would-be buyers check the condition of the vehicles, services that are not available online.

Be Forward has the larger database between the two and registers more sales from would-be buyers online.

According to Be Forward, the top selling brand for the local market is Toyota while the top vehicle makes are the Toyota Corona Premio, Coralla, Spacio, Hiace Van, Raum, Mark II, Landcruiser Prado, Premio, Nadia and Harrier.

The Mercedes Benz C-Class rounded off the top 10 selling cars for the local market.

The average price of vehicles sold on the local market, based on the top 10 selling cars is $1 240. This means that Zimbabweans spent about $80 million last year on imported vehicles.

Within the new vehicle market, Zimbabweans in the lower income bracket spend an average of $15 000 on sedan models in the country. Using this average against the number of imported cars sold in 2015, the number is an average of about $54,49 million. For now, Zimbabweans continue to look to imported vehicles to join the motorists’ league because of the depressed state of the economy. – The Standard

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