15 February 2013

Tanzania: Car Sales Drop Due to Shilling Depreciation

USED cars are sold through a variety of outlets, including franchise and independent car dealers, auctions. But private party sales are facing tough going.

The business enshrine in the last one decades after economic liberalization to now put the number of cars in the road to over 1.2 million, hangs on balances. The 'Daily News' spot survey reveals out that the second-hand auto dealers are facing tough times pushed by the shilling depreciation and high import duties to drive car prices out of customers' affordability.

The dealers, estimated between 70 and 100 in Dar alone, are also concerned about the taxmen--Tanzania Revenue Authority (TRA)--phenomenal of uplifting prices despite the fact that the values are posted on the most international dealers websites.

They said the business "is very tight" as sales volumes have dropped by between 40 and 60 per cent in the last two to three months. Last January dealers sold an average of 10 cars compared to four of this January. However, TRA said the numbers of vehicle in the streets have increased by about 70 per cent in a single year (2011), reflecting an emerging middle class as a result of improved economy and social welfare.

Tanzania Revenue Authority (TRA) data shows that 93,009 vehicles of different categories-- buses, heavy duty trucks, light trucks, mini buses and saloons--were registered by the end of 2011 compared to 55,144 in 2010. The data, excluding government, police, army and donor funded vehicles, shows that 67 per cent of registered vehicles in a single year were light passenger vehicles with carrying capacity of less than 12 passengers--the saloon cars.

On the other hand, the C.M. Company Ltd President, Mr Charles Mtawali, said the shilling depreciation has impacted negatively to their business because it has pushed up the cars prices beyond the affordability of many in 2012. "We haven't sold a car in January," Mr Mtawali said adding, "We have stopped importation to observe the shilling trading patterns before we make a second move."

Since last January, the shilling depreciated by almost five per cent to over 1,625/- as quoted by commercial banks. This decreases huge gap if one wants dollars in bulk. The C.M President acknowledges this is a low season as car buyers have a number of financial obligations to attend to. This year, however, is the hardest compared to the previous one as the shilling's fall pushed prices to the roof.

"We are struggling to pay even our staff salaries," he said. BISMA Motors Sales Executive Ms Rachael Kweka said the firm closed one cars showroom in Morocco area as sales are so bad that workers have not been paid January salaries. "It's not due to competition; rather it is on account of the shilling's depreciation, which pushes car prices up by almost 30 per cent.

We receive a number of a would-be-buyer but price are driving them away," Ms Kweka said. The favourite brand like Toyota's Vitz, Carina, IST, Rav4, Noah; and Nissan's X-Trail prices are untouchable. For instance, a Vitz which just previously sold for 6m/- last year today is going for between 8.5/- and 9.0m/- a piece. Carina Si and Ti prices also have gone up from around 8m/- to over 10m/-, Noah old model from 9.5m/- to 14.5m/-, Rav4 from 10m/- to 15m/- while X-Trail from around 15m/- to over 22m/-.

Shaymaa Commission Agent Director Mr Mohamed Farid Mohamed said the number of cars imported duty free have gone up enormously to impact negative selling volume thus threaten to force them out of business. "High import duty plus shilling depreciation equals to drive out clients," Mr Mohamed said. Import duty in addition to raising the price of vehicles are almost equal to the price of car CIF (cost insurance and freight) to Dar es Salaam.

For instance, a 1200cc car that was taxed around 650,000/- ten years ago is now charged over 4m/-. Tezz Commission Agent Sales Executive Ms Mwajuma Salim said motor vehicle middlemen are also adding salt to the no-customers-trend at the showrooms as most don't have overhead costs.

"Middlemen's overhead costs are very minimal. They don't pay rent nor workers salaries let alone taxes, thus undercut price easily," Ms Salim said.A car sales executive, Mr Mohamed Osman, blamed the coming of international second-hand car dealers the like of Car Junction and Be. Forward which opened offices in Dar to reduce their traffics.

O n the increase of vehicles in street, according to the Mzumbe University's Dar es Salaam Business School Senior Economists, Dr Honest Ngowi, it is reflection of increased middle class in the country. "The data quickly tells us that the consumption pattern has shifted from basic needs to luxurious goods, and it is simply the emergence of the middle class," Dr Ngowi said.

Between 1980s and 1990s owning a car was considered luxurious but economic liberalisation now has enabled many people to shift from basic needs to luxurious assets through saving or borrowing. "The boom has also its positive and negative effects... it brings about congestions in cities, especially in Dar es Salaam and Arusha, where the road expansions are not correlated to the influx of cars," Dr Ngowi said. It is estimated that about 70 per cent of saloon cars are in Dar es Salaam and Arusha.

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