Posted by: Martin | January 15, 2012

Import limits on used cars

I’m saying it again: Come on Ouattara, don’t disappoint now!

There’s been a lot of good news and propositions coming out of the Ivorian government, but think I’ve just found a bad one.  And it’s something that affects my business:  It seems the Ivorian government intends to introduce a ban on importing used cars older than a certain age.  The government seems to be aiming to set the limit to 5 years whereas the transport industry wants it raised to at least 10 years.

Quite a lot of West African countries have these kind of restrictions, from a quick surf I see:

Senegal – 5 years since 2003

Guinea – 5 years since 2011 

Ghana – No limit but penalty fees for cars older than 10 years (just like in the Ivory Coast right now)

Nigeria – 15 years (according to the Import prohibition list of the Nigeria customs) It seems that they started with a 5 year limit in 2001 and then progressively increased it.

The case for a restriction

The thinking behind these restrictions seems to be:

  • National pride – not wanting their country to be a dumping ground for old cars from the developed world
  • Aesthetics – a wish to make their country look better with more new cars on the roads
  • Environment – old cars pollute more
  • Congestion – with less cars imported, congestion on the roads could be mitigated

and maybe:

  • Protectionism – even if there is no domestic car industry, the limit could be an attempt to promote one or at least promote domestic assembly of car parts

The case against

And here’s why I still think these import restrictions don’t make much sense:

  • Cars up to 5 years old are expensive – a vast majority of Ivorian citizens can not afford them. A small elite that can afford new cars (and don’t use taxis) won’t be affected, but transport costs for everybody else will increase, thus increasing poverty, and reducing mobility and business activity.
  • Public transport in Abidjan is very limited, and has to a large degree been replaced by Woro-Woros (Taxis taking multiple passengers on a hop-on hop-off basis along a set route).  With a 5 year limit, the return on importing a Woro-woro is so low that it doesn’t make economic sense to import cars to make Woro-Woros. So that would mean game over on expanding my taxi business in it’s current form. Also, transport costs would go up as the supply of Woro-Woros grind to a halt making basic transportation unaffordable for some Abidjan residents.
  • But prices won’t go up so much so it makes sense to import 5 year old cars, due to the existing car park.  A limit actually causes old wrecks to be more valuable, so everybody will keep patching up the existing cars as long as possible. Contrary to the intention of the import restriction, the car park is likely to get older, nullifying any pride, aesthetic, or environmental benefits. You kind of get a Cuba situation (though Cuba happened to have quite beautiful cars prior to Castros revolution).
  • The elite that can afford new cars aren’t likely to buy many small Toyotas, so there won’t be a trickle down of cheaper cars suitable for taxi service.
  • It will create incentives for smugglers and for corruption of custom officers.
  • Government revenue through import duties will go down  as fewer cars will be imported – and as mentioned in the Customs post import duties is a very important part of government revenue.  Admittedly though,  the Ivorian government is also proposing to reduce import duties which I think is a good thing, but does contributes to reduce revenue.

All in all it’s a bit like a tax that – like all taxes – has a negative effect on people that pay it (in this case ordinary Ivorians paying for transport) but that instead of increasing revenue to the government does the opposite.  The only positive thing I can see is that it’s likely to mitigate the trend of increasing congestion in Abidjan a bit.

Senegal has had a strictly imposed 5 year limit for quite a while now. Here are some of the reactions to it I’ve picked up on Senegalese Internet forums:  [Sorry about the French, too tired to translate now]

Voila un système qui en fait provoque le contraire de ce qui est prévu. Qui au Sénégal a les moyens de se payer une voiture de moins de 5 ans? Qui ? Une certaine élite voila. Donc le résultat est que en fait les propriétaires de vielles bagnoles continuent de les rafistoler étant donné qu’ils n’ont pas les moyens de s’en acheter une autre et c’est en fait cela qui contribue à donner cette image de parc automobile poubelle.

Avec cette loi, la moindre poubelle vaut une fortune. Le Sénégal est le  pays d’Afrique de l’ouest où le parc auto est en aussi mauvais état

la seule motivation etait que Wade veut prèserver ses actions et celles de sa famille dans l’usine de montage à thies vos appreciations sont fausses vous confondez le confort de vos gros cylindre avec les vèhicules morgue roulante sur nos routes.le renouvellement de notre parc automobile se fait à deux niveaux, les riches et voleurs, ils n’ont pas de problème car l’augmentation des voitures neuves ne concerne que la minoritè riche de la societè mais fait un tour dans nos garages et l’interieur ,tu te rendras compte qu’il y’a un apprauvissement de notre parc automobile

le renouvellemt de nos vehicules ne se fera jamais de l’interieur seulement 5% des senegalais ont les moyens de par leur revenus de se tapper un vèhicule neuf et autre echec les accidents deviennent de plus en plus cruels

vous parlez de cette mesure de limitation des voitures importèes, pour moi c’est une grande BETISE, le senegal ne fabrique pas voiture, et ces dernieres coutent maintenant tres chères là bas, essayez de prendre un taxi 90% des taxis,une fois dedans tu pries pour arriver chez toi sans problème


Responses

  1. The government obviously knows about the importantance of old vehicles because it’s busy importing buses and police cars from France that are well older than this 5 year limit. That should in principle put them in a good position to empathise with private importers like yourself. Perhaps a better principle would be to enforce pollution tests and get the 1% of vehicles off the road that are probably causing 80% of the pollution.

  2. Yeah, that would be better. Unfortunately it looks like the question is more if there will be a 5 year or 10 year ban, instead of whether there will be a ban at all.

  3. Another case for restriction might be to better secure the transport in the country. Deadly accidents are unfortunately common now (many cases, such as the bus jumping in the lagoon) and I think the government want to limit these accidents with vehicles in better shape and a better road infrastructure.

    Decreasing the import duties on cars from 51 to 12% (source http://news.abidjan.net/h/422672.html) is huge, but on the other hand, a 2008 car cost around 8 to 10,000E, too expensive for a woro-woro business purpose (as already said above). Right now the penalty for car older than 10 years is 150,000fCFA (230E) then 10,000fCFA (15E) for each additional year (source: Guichet Unique of Abidjan Port). Thus facing the challenge to send as much Corolla cars to Abidjan before this ban takes place, and to run the business for 3/4 years. Let’s say reaching 10 vehicles imported before this ban takes place, assuming it’s not implemented before the end of 2012. That’s a considerable challenge, nonetheless feasible! Greater attention on the state of the cars when acquiring them in Europe should be put, in order to have less repairs during the time of taxi operation in Abidjan. Then selling those cars on the local market because of a possible lack of local reusable parts (as stated above) and moving on to another investment. I think that way the woro-woro business plan still sounds attractive for the coming years.

    • Yeah, security is another argument put forward. But it’s the same thing there – security wont get better with an older car park. Instead to solve that problem I’d propose stricter inspections, better infrastructure and better enforcement of traffic rules.

      It is not at all certain that imports of spare parts will be banned as well – we’ll see. And yes, now is the time to send cars before teh ban takes effect.

  4. I think, if it was me, I’d get into the car repairs business! You know what they say, in the gold rush – sell shovels!

  5. […] lost to bulldozers -The transport sector reforms.  I’ve already mentioned the proposed import restrictions, but it also seems the government want private businesses in the transport sector to get subsidised […]

  6. Even if these import limits exist, the fact remains that buying used cars will still be much more affordable than buying a new one.

  7. There are three main criteria used in pricing any given auto repair. The first is the labor rate, or what the shop charges for the time and expertise that goes into repairing your vehicle. The second is for the parts themselves, and whatever other shop support materials are used in the process of the repair. The third area to consider are the fixed costs or overhead that the repair shop has to cover, but that doesn’t get reflected on your bill.,

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