Customer Logins
Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
Customer Logins2009 automotive prices in 2013: a reality in Venezuela
How would you react if a law determined that all new vehicles, from now on, should have a sticker price from the first half of 2009? Moreover, could you as a dealer network afford to give back to all you customers what they paid beyond those prices between then and now? This can sound like an unrealistic scenario, but is a law approved in Venezuela.
The law was create after Congress inspected and questioned OEMs, dealers and independent stores and got to the conclusion that vehicles are hidden, so customers are misled to think that there is no inventory at all. Later, these vehicles are sold as used - in Venezuela, used vehicles are more expensive than new ones.
Vehicle sales are already under government control. On one hand, it allocates the amount of dollars that OEMs can have to buy parts and assemble vehicles as well as how many units each company can import. On the other hand, the government uses its joint ventures with a Chinese and an Iranian company to import and assemble vehicles and to choose who will buy them - usually government employees, in a move to "buy" loyalty. With that, supply does not meet demand, and used vehicles become the only option for many Venezuelans.
There is no way that an outsider can know if it is true or not that vehicles are hidden - Congress also says that the market has grown "exponentially," which is not true. After a peak of 452,778 light vehicles in 2007, Venezuela's market has known just one path: down. Last year was an exception, when sales increased 7.5%, but Polk does not see any growth in the coming years. Our light vehicle forecast is rather stable around 100,000 units/year.
According to the new law, a commission will set the vehicle prices and, until that does not happen, prices will need to go back to what they were in the first half of 2009. Dealers must refund customers who bought a car for more than those prices and, if dealers fail to do so, they will have to pay double of the amount in fines. Inflation in Venezuela is one of the highest in South America, never below 20% since 2009.
Furthermore, a car that was more expensive than its MSRP will not be insured. OEMs will need to inform the government what the dealers profit margins are and compare online their suggested prices in Venezuela with prices in other Latin American countries - as if all countries had the same tax structure and costs.
The law poses a real threat on dealers. How would you survive in an environment like this?
Augusto Amorim is senior analyst, South American light vehicle production forecast, IHS Automotive
Posted on March 7, 2013