/ 12 September 2014

Zim stalls over used car debacle

Cash cars: Imported secondhand cars are cheap and provide the state with much-needed income.
Cash cars: Imported secondhand cars are cheap and provide the state with much-needed income.

Under pressure to deal with the flood of used car imports, the government faces a tricky dilemma – a ban on them would cut the country’s import bill but it would be very unpopular and deprive the government of one of its biggest cash cows.

Zimbabwe is spending more than $1-billion a year on used car imports from Asia, which has led to the virtual collapse of the local car assembly industry, which has been priced out of the market by the cheaper imports.

Now local car assemblers, forced to shut down and lay off workers, are putting increased pressure on the government to ban the imports.

Industry and Commerce Deputy Minister Chiratidzo Mabuwa said the government was developing a new policy meant to reduce car imports to reduce the import bill.

“We have a document that we have since furnished to the Cabinet which is going to be debated on,” Mabuwa said at a parliamentary committee meeting last week. “In that document, there is an issue on the manufacturing of vehicles and the issue of the money that is going out of the country to buy vehicles that come here and then they break down.”

The government would also examine whether the country’s existing assembly plants could meet demand, Mabuwa said.

Unable to cope with demand
According to experts in the industry, the plants have been so damaged by the competition that they would not be able to cope even if a ban was introduced. They say the big four car dealerships in Zimbabwe sold a combined 2?945 units last year, but about 80% of the cars on Zimbabwe’s roads are imported.

“Even if all the major firms were to start operating at peak capacity, they would not be able to churn out the number of vehicles needed at the prices demanded by the market,” Fortune Nhambare, the head of a large Harare dealership, said.

Zimbabweans began importing cars because they could not afford the more expensive locally assembled ones. This is mainly because cars are bought with cash, since there is no financing for buyers, according to Mike Ndudzo, whose state-owned Industrial Development Corporation owns a stake in car assembler Willowvale.

Stanford Sibanda, the head of one of the country’s biggest dealerships, Nissan Clover Leaf, and head of the Motor Industry Association, said low incomes meant the local market was unable to buy new vehicles.

“They [customers] would want to buy new cars but the reality is that they don’t have disposable income,” he said. “It shows that the market has shifted in the last three years.”

A total ban on car imports would also be felt in South Africa, whose sales to Zimbabwe were valued at R1.85-billion last year, made up of R1.1-billion in vehicles and R839-million in components, according to the South African Automotive Industry Export Council’s Automotive Export Manual.

Some in the motor industry believe a ban on car imports would save their industry, which they insist has spare capacity to meet demand.

“It’s not like there is no capacity – there is no government support,” Tarik Adam, the managing director of the car assembler Quest, said. “Many companies that manufacture car batteries, tyres, seat covers and filters have closed down because people are now importing most of the products.”

To stay afloat, Quest has reached agreements for the assembly of Chinese brands such as Foton, Cherry, JMC and Cummins. Quest can assemble 105 cars a day and 100 buses a month, but is operating at a fraction of its capacity, according to Adam.

At its peak, Quest employed more than 3?000 workers producing 35 vehicles a day. The company now has fewer than 100 workers and is stuck with more than 500 cars in its stores that it cannot sell.

But the government itself is reluctant to ban imports, despite repeated threats to do so. They are a big source of income, which earned the government more than $250-million in import duties on more than $1.2-billion worth of vehicle imports last year.

There are also allegations that senior government officials are involved in the car import business.

In urban areas around the country, worsening traffic jams are evidence of the flood of used car imports – and the failure of local authorities to deal with them.

In Harare, the city council has ordered commuter omnibuses out of the central business district and the city spokesperson, Leslie Gwindi, admits that it is struggling to find a long-term solution.

Despite the trouble much of the industry faces, there are still some rays of light, especially in the high-end market.

A new Jaguar and Land Rover (JLR) repair centre opened in Harare in August, which will cater for the growing market for those vehicles, according to Rory Beattie, the customer services director of JLR South Africa.

The 10?500m2 facility in Harare’s Graniteside industrial area, which paints a contrasting picture with much of the motor industry, “is real cause for celebration”, said Moses Chingwena, the chief executive of Croco Motors, JLR’s local partners.