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In October 2011 I reported that car purchase was finally legalised in Cuba after over 50 years of tight restrictions country-wide. However at the time I had expressed reservations as to how much new and used car sales in Cuba could grow given the average monthly salary in the country is just 17 dollars. Turns out I was on the money… The 2011 law change affected car purchases between Cuban consumers and last January all restrictions on vehicle purchase were lifted, meaning importing companies can now start doing business in the country.
According to South African website iol.co.za, citing the official website Cubadebate.com, itself citing Iset Vazquez, vice president of the state enterprise Corporacion CIMEX, Cuban dealers sold just 50 cars and 4 motorcycles across the country in the first six months of 2014! That’s old and new combined! Quite an unbelievable result that actually has a very simple explanation. Upon import into the country, it would appear that sticker prices are marked up a staggering 400% or more, pricing family sedans like European sports cars. To its defence, the Cuban government reportedly said it would invest 75% of the proceeds from new car sales in its woeful public transportation system.
Even more troubling, most of the sales so far this year appear to be 2nd hand, and even then they are pricing just about every living Cuban out of the market for a car. A few examples: a 2013 Peugeot 206 (a model originally launched in 1998) was priced at $91,000 in Havana while the larger 508 would set you back wanted $262,000. Not even in Singapore are prices so high.
If Chinese carmakers have started exporting to Africa in the early 00′s, they set foot in Latin America even earlier, with JAC starting to export trucks to Bolivia back in 1990. Similarly to the strategy they adopted in Africa, Chinese manufacturers have initially focused on the less developed car markets in the region. They are now in the process of stepping up their involvement by launching in the bigger, more mature markets like Argentina and Brazil.
FAW S80. FAW is the 10th most popular brand in Uruguay vs. #16 at home in China.
In fact, the foundations the Chinese have built in secondary Latin American car markets are potentially their strongest in the world so far. The first logical anchor points in the region are Uruguay and Paraguay, both located between Argentina and Brazil and all part of the Mercosur, which makes it easier to export towards those two powerhouses as local assembly with 30% to 50% share of local components currently receive zero-tariff status inside the Mercosur. As a result both Chery and Lifan (40,000 units/year capacity) have assembly factories in Uruguay while Dongfeng has one in Paraguay.
In Uruguay, 26 of the 54 brands on sale are Chinese, capturing 23.3% of the market in 2013, up from 19.5% in 2012 – their highest country penetration outside of China and actually on par with the penetration of Chinese passenger cars within China! There are 8 Chinese carmakers in the Uruguayan Top 20 and 2 among the Top 10: Chery is 5th with 5.9% share and is even up to #2 in February 2013 with almost 10% of the market below just Chevrolet and above Volkswagen! FAW is 10th at 3.3%, followed by Geely at #13 and 2.7% (25 units short off beating Toyota!), BYD at #15 and Great Wall at #16.
The DongFeng Mini Pick-up is now produced in Paraguay.
The Caribbean region is yet another under-developed zone most carmakers traditionally sidestep, except the Chinese. Geely regularly ships cars to Cuba, the last batch from October 2011 was composed of 1,300 Geely CK (now a common sight in La Habana as a police car) and 250 Emgrand EC7. In the Dominican Republic, a few Chinese models have already managed to break into the Full Year Top 20 like the BYD F3 (#9 in 2010), the DongFeng Cargo Van (#14 in 2011) and the Jinbei Haise (#18 in 2011).
Brazilian JAC J3
This all means that Chinese carmakers have now established a solid footing in almost all Latin American markets, working extremely hard to secure the foundations for long-term success in the region. They are now using these stepping stones to access Argentina (all-time high 955,000 units in 2013) and Brazil (record 3.6 million units in 2012), where the volumes really are. In Argentina, Chery has started assembling a limited amount of cars locally and as a result has seen a few models make their way up the ladder: both the Chery QQ (#47) and Tiggo (#53) reached their highest ranking so far in the country in March 2013.
In Brazil, JAC broke with the Chinese tradition and chose to enter the market all guns blazing on 18 March 2011, which they called J-Day. They simultaneously inaugurated 50 dealerships across the country and hired a famous TV presenter, Fausto Silva, as their ambassador in a multi-million dollar TV campaign.
However JAC’s strong start in the country has since fizzled out. The JAC J3 hatchback (#36) and J3 Turin sedan (#56) both hit their highest ranking only 3 months after launch in June 2011 while in the meantime the Chery QQ peaked at #36 in September 2011, but 2012 was harsh: J3 at -37%, J3 Turin at -40% and QQ at -25%, on the back of increased levies on imports. 2013 wasn’t better with JAC down 11% and Chery down 45% as a whole. In 2013 the JAC J2 became the best-selling Chinese model in Brazil but it only ranks 87th. Now both manufacturers realise their success in Brazil lies in local assembly: Chery is reportedly building a 150,000 annual unit-production facility in the São Paulo state while JAC is set to open a 100,000 annual vehicle-plant in the state of Bahia in 2014.
A very strong base in Latin America’s developing markets should ensure Chinese manufacturers surf on these markets’ predicted explosive growth in the next coming decades. The next challenge is to manage to crack more mature markets like Brazil and Argentina and this will require a much more significant level of investments in the form of large scale manufacturing operations. But the rewards could be priceless: thanks to its brand-new factory producing models tailored to Brazilian tastes, Hyundai has tripled its market share in the space of a few months… No doubt the Chinese are watching with tremendous interest.
Stay tuned for Part 3 of this series: Eastern Europe!
Now that Cuban consumers can purchase a car freely, Chinese manufacturer Geely has shipped a batch of 1,560 cars to the country, composed of 1,310 units of the Geely CK and 250 units of the Emgrand EC7. These cars are destined to be used by the Defence and Tourism Ministries, rental car companies and possibly private buyers.
This is the second time Geely exports a batch of cars to Cuba after shipping 1,500 units of the Geely CK in 2009. Geely owns Swedish automaker Volvo and now exports to a significant numbers of countries around the world: Peru, Uruguay, Chile and Venezuela in South America, Bangladesh and Indonesia in Asia, Russia, Romania and Turkey in Europe, and South Africa. In 2011 Geely began exporting to Australia and New Zealand and last September it was the turn of Saudi Arabia.
Historical date today in Cuba: until now only people who bought a car before the 1959 revolution or those who were granted the right to purchase one afterwards for personal or political achievements could actually own their vehicles. From October 1, every Cuban citizen can now purchase a car, and it is also now legal to own more than one vehicle!
Now the market is wide open and will be fascinating to follow over the next couple of years, keeping in mind the average monthly salary in Cuba is 17 dollars. Let’s say the yank tanks still have a few good years ahead of them…
Source, more pictures and Cuba street videos below.
The Cuban car market structure is a fascinating testimony of the country’s last 60 years history. Its famous 1950’s American cars (60,000 are still in circulation), relics of the pre-revolutionary period, are now outnumbered by over 100,000 Ladas, the most visible legacy of the country’s Cold War alliance with the Soviet Union.
More recently, Hyundai seems to have reaped the title of best-selling brand in Cuba, with the Hyundai Accent the probable Cuban best-seller, and the i10 and Santro also doing very well, especially with rental car companies
Hyundai Accent, possibly 2010 Cuban best-selling car, thanks to popularity with rental companies.
Lastly in 2009, government and police have started replacing their Ladas with Geely CK’s, symbolizing Cuba’s recent closer ties with China, with as much as 1,500 units imported in H1 ’09.
More commentaries, striking street scene pictures and informative street videos are below, click on ‘read more’ just below the Geely CK picture.