via Zim lacks capacity to assemble cars – The Zimbabwe Independent May 15, 2015 by Elias Mambo
ZIMBABWE no longer has the capacity to manufacture or assemble cars for the local market economically as the country does not have the economies of scale, with global trends suggesting developing countries move away from manufacturing vehicles, motor industry experts say.
Senior automobile executives say the industry is already distressed with companies such as Amalgamated Motor Corporation AMC, Amtec, Dulys and Puzey and Payne failing to turn around their financial situations as the local market prefers to import rather than buy locally.
“Most dealerships, especially in centres outside Harare like Bulawayo, Gweru, Mutare, Masvingo and Chiredzi are struggling for viability following the controversial import duty hike by government and an order to all government departments and state enterprises to buy vehicles from local car manufacturers will prove to be the last nail in their coffin,” one executive said this week.
Government, through circular number 16 of 2011, ordered that unless otherwise cleared by authorities, operational vehicles should come from local assemblers.
Consequently parastatals have been ordered to buy vehicles from either the state-owned Willowvale Mazda Motor Industries (WMMI) in Harare or Quest Motor Corporation in Mutare in line with government’s latest economic blueprint, ZimAsset.
“In advanced sectors like the automobile, once confidence is easily destroyed when consumers are forced to procure certain brands/models when they clearly have their own preferences,” another executive said. “In fact, the two intended beneficiaries of these duty hikes (Quest and WMMI) have largely been shunned by motorists and the buying public at large even where they are cheaper than the imports which are now being laden with punitive duties.”
A comparison of vehicle sales shows a sharp decline as clients opt to import rather than buy locally.
In 2010 Mazda sales were at 475 compared to a total industry volume of 4 400 vehicles, representing a mere 11% of market share.
Its sales declined to only 240 units in 2014 (7% of market share) and as a result, another executive said, it will be an expensive move to retool WMMI to accommodate a limited range of products.
“With such lack of sales some dealerships have already started closing some of their branches countrywide as new sales figures may decrease by as much as two-thirds of their current levels because of the new duties,” said the executive. “WMMI itself has applied to retrench over 101 of its current staff, while most of their workers are now on 24-hour notice.
Last year government hiked import duty on second-hand motor vehicle imports following the adoption of a new duty regime. The increase in duty saw tariffs on passenger motor vehicles with an engine capacity of up to 1 500cc go up from 20 % to 40 %, while that on double cabs is 40 % to 60 %.
Despite the increase in import duty Zimbabweans continue buying cars from outside the country, shunning local manufacturers because of price and choice considerations.
Sources in the industry said it is not only grossly unfair to force the market to buying a product which could be substandard and unsuitable for requirements under the guise of protecting a non-existent local industry.
“This idea that duties have been increased and an order has been issued on government purchases allegedly to protect the so-called local assembly plants is ridiculous,” one source said.
“How do you protect a virtually non-existent industry?”
“Further to this, there have been proposals by some legislators to compel the government and parastatals to exclusively purchase vehicles from Willowvale WMMI and or Quest Motors under the guise of supporting ‘local industries.’ The truth of the matter is that WMMI does not assemble cars anymore. The last car to be assembled at WMMI rolled out of the plant in June of 2011, and even then, these last units — Mazda B2200s — were just products of the salvaged remnants of kits which were left over from the productive years pre-2010.
“All brand new vehicles on offer on the local market — Isuzu, Toyota, Ford, Hyundai, Kia, Mercedes, BMW, Mitsubishi, Land Rover, Nissan, Tata, Chevrolet, Opel, GWM and VW — are being imported the same way as the Mazdas which are then distributed and retailed by WMMI,” a source said.
“Quest Motors is importing semi-knocked down kits. This is a simple matter of putting together a few panels and components and calling it ‘locally-assembled’.
“There is no local value-addition and no real local components are added, hence there is no justification in protecting such companies.”
When contacted for comment last week Quest Motors public relations manager Caleb Bvumai said he was busy compiling the company’s statistics on production levels.
Last week before this newspaper wrote a story on the automobile industry headlined “Government policy devastates automobile companies”, it sent an email to Bvumai on May 7 in the morning to which he promised to respond before end of day.
Bvumai was then called and he confirmed receipt of the email. He was again contacted on the same day at 4pm ahead of publication deadlines and he promised he was still compiling the requested information, but not before accusing the Zimbabwe Independent of pushing him even though he had agreed to respond to the questions.
Bvumai, however, eventually failed to send a response as promised. after publication of the story, Quest Motors, through their lawyers Venturas and Samukange, wrote to the Independent demanding a retraction of the story alleging it was defamatory, while also claiming it had not been contacted for comment despite evidence to the contrary. “We refer to the article contained in the Independent dated the 8th to 14th May,” reads part of the letter.
“We draw your attention to the innuendo and literal meaning of the article to the effect that our client’s capacity is now decimated and that our client no longer locally assembles cars.”
“Your editor (sic), Elias Mambo, did not elicit a comment from our client prior to the publication of the defamatory article. The intention of your article is clearly to malign and damage our client’s hard earned reputation both locally and internationally.”
Yet evidence shows Quest Motors was contacted repeatedly for comment before the story was published but did not reply.
COMMENTS
it was all just a trick so that ZIMRA could raise import duties.
We have all sorts of high-sounding economic analyses but forget to keep our heads level and our feet on the ground. What we don’t need are economic theories, what we do need is COMMON SENSE.
On vehicles for instance first is to ensure local assemblers are well run, next is to require govt to buy locally. After that is to impose a reasonable duty on imports (not a rush of blood to the head!) Most important of all is stop attacking local industry with insane policies such as “indigenisation”.
The biggest problem of all is that from Mugabe on down, no one seems to understand business, manufacturing (or agriculture!) They are all, as Eddie Cross says, clueless.
When British Leyland regained their Mutare factory in 1980 they were able to start assembling Land Rovers and Mechanical Horses but not BL Cars as the factory could not handle the required robotic assembly. Instead they imported “deleted” kits from Nissan in Japan and added local components such as glass,paint,radiators, exhausts, wheels,tyres and petrol tanks, plus other South African components. Hand assembly provided employment and the deleted kits were a massive saving of foreign exchange. Willowvale had a similar operation. BL won the worldwide Nissan competition for the best assembled Nissan Pulsar.
Cars were assembled to “shortage” and stored in their hundreds at the factory pending the arrival of the missing components. This led ignorant government ministers to accuse them of hoarding waiting for a price increase. A Deputy Minister toured the factory and threw a tantrum at the end of the visit when she was not given a free sample! Thus the white ants moved in and now we have to import cars and the workers beg from tourists.
Name one minister who is paying duty to Zimra for his / her imported car business and I will eat my hat.
The problem in Zimbabwe is – STUPIDITY