Publications
Partners
CARACAS, Venezuela - Venezuelans enjoy free highways and cheap petrol but are struggling to buy cars because the country doesn't have the foreign currency to import assembly parts.
Vehicle plants are facing a disappointing year in the oil-rich Opec nation, producing only 20% of the volume of 2013 when the nation went into an economic crisis.
Most economists blame the South American country's problems on a decade of rigid currency and price controls - as well rising debt, dependence on imports and stagnant economic growth.
Four of the seven assembly plants in the country - owned by Chrysler, Ford, Iveco and Toyota - have gradually reduced production since February 2014.
SAME DOLLAR, TWO PRICES
Foreign automakers must go through a complex bureaucratic process to obtain US dollars and the country's central bank is only providing them at the official rate of 6.3 bolivars to the dollar (equivalent to R10.38) to importers of designated priority goods such as food and medical supplies.
Other importers have to buy dollars at a higher rate at government auctions. Many companies have complained that Caracas is not providing them with enough hard currency.
The currency controls, in place since 2003, have led to shortages of a wide range of basic necessities and fuelled an inflation rate hovering just under 60% a year (SA is on about 6%).
So far in 2014 government data has shown that the auto industry has received less than one percent of the foreign exchange granted to importers at a time of high inflation and shortages of food and medicine.
VEHICLE PRODUCTION DROPS
Consequently, vehicle production has seen a sharp drop of 83% so far in 2014 over 2013, according to Venezuela's Automotive Chamber.
The department reports 104 000 units were produced in 2012, 72 000 in 2013 and the first quarter of 2014 produced only 3990. The industry has been halved in five years.
Faced with this crisis, president Nicolas Maduro's government called local representatives of Chrysler, Ford, GM and Toyota to address respective factories' currency settlements, estimated at almost R29-billion.
Although the government announced that GM would not close its plants this year union leaders have said its two factories would stop production in May 2014 because it had no input.
NO CARS TO SELL
The crisis of vehicle production and supply is nothing new. Dealers across the board have almost no units to sell and many only keep their doors open for vehicle servicing. Customers often have to wait a year for delivery of an ordered vehicle.
The middle and upper classes have turned in recent years to buying cars as a way to hedge against inflation, currently four times the interest rate on bank deposits, but as demand exceeds supply many have to resort to the used-car market where vehicles are more expensive than new ones - the latters' prices are state-controlled.
A new 2014 Mitsubishi Lancer costs 458 000 bolivars (R474 000 at the official rate or R67000 on the black market). A used 2012 unit costs the equivalent of R1.3-million at the official rate and R191 000 on the black market).
A middle-class family needs an average of four years' income to buy that second-hand Mitsubishi and such a transaction would involve a bakkie-load of cash in a country where the highest denomination is 100 bolivars, or less than $1.50 on the black market.
Vehicle assembly employs about 11 000 people directly and 100 000 indirectly, accounting for nearly one percent of private sector jobs.
Vehicle plants are facing a disappointing year in the oil-rich Opec nation, producing only 20% of the volume of 2013 when the nation went into an economic crisis.
Most economists blame the South American country's problems on a decade of rigid currency and price controls - as well rising debt, dependence on imports and stagnant economic growth.
Four of the seven assembly plants in the country - owned by Chrysler, Ford, Iveco and Toyota - have gradually reduced production since February 2014.
SAME DOLLAR, TWO PRICES
Foreign automakers must go through a complex bureaucratic process to obtain US dollars and the country's central bank is only providing them at the official rate of 6.3 bolivars to the dollar (equivalent to R10.38) to importers of designated priority goods such as food and medical supplies.
Other importers have to buy dollars at a higher rate at government auctions. Many companies have complained that Caracas is not providing them with enough hard currency.
The currency controls, in place since 2003, have led to shortages of a wide range of basic necessities and fuelled an inflation rate hovering just under 60% a year (SA is on about 6%).
So far in 2014 government data has shown that the auto industry has received less than one percent of the foreign exchange granted to importers at a time of high inflation and shortages of food and medicine.
VEHICLE PRODUCTION DROPS
Consequently, vehicle production has seen a sharp drop of 83% so far in 2014 over 2013, according to Venezuela's Automotive Chamber.
The department reports 104 000 units were produced in 2012, 72 000 in 2013 and the first quarter of 2014 produced only 3990. The industry has been halved in five years.
Faced with this crisis, president Nicolas Maduro's government called local representatives of Chrysler, Ford, GM and Toyota to address respective factories' currency settlements, estimated at almost R29-billion.
Although the government announced that GM would not close its plants this year union leaders have said its two factories would stop production in May 2014 because it had no input.
NO CARS TO SELL
The crisis of vehicle production and supply is nothing new. Dealers across the board have almost no units to sell and many only keep their doors open for vehicle servicing. Customers often have to wait a year for delivery of an ordered vehicle.
The middle and upper classes have turned in recent years to buying cars as a way to hedge against inflation, currently four times the interest rate on bank deposits, but as demand exceeds supply many have to resort to the used-car market where vehicles are more expensive than new ones - the latters' prices are state-controlled.
A new 2014 Mitsubishi Lancer costs 458 000 bolivars (R474 000 at the official rate or R67000 on the black market). A used 2012 unit costs the equivalent of R1.3-million at the official rate and R191 000 on the black market).
A middle-class family needs an average of four years' income to buy that second-hand Mitsubishi and such a transaction would involve a bakkie-load of cash in a country where the highest denomination is 100 bolivars, or less than $1.50 on the black market.
Vehicle assembly employs about 11 000 people directly and 100 000 indirectly, accounting for nearly one percent of private sector jobs.
