Govt policy devastates automobile companies

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LOCAL automobile players fear heavy job losses resulting from the huge increase in import duty and orders to compel government departments, parastatals and other state enterprises to exclusively buy cars from the struggling Willowvale Mazda Motor Industries and Quest Motor Corporation purportedly to protect domestic industry.

Elias Mambo

This comes after government’s controversial import duty hike and an order to all its departments and state enterprises to buy vehicles from local car manufacturers through cabinet circular number 16 of 2011 which states that unless otherwise cleared by authorities, operational vehicles should come from local assemblers.

As a result, parastatals have been ordered to buy vehicles either from Willowvale or Quest Motors, supposedly in line with government’s impractical economic blueprint, ZimAsset.

However, automobile executives say this will badly hurt major dealers like Croco Motors which offer the broadest and most diverse line of vehicles in Zimbabwe, including Ford, Kia, Nissan, Toyota, Mazda, UD trucks, Renault trucks, Volvo trucks and buses.

Sources in the automobile industry told the Zimbabwe Independent this week that the government directive will have a huge negative impact on affected companies as it directly threatens 13 648 jobs held by workers employed by 1 751 registered players in the sector.

“The idea to impose import duty purportedly to protect 256 jobs at Quest and 36 jobs at Willowvale after the company retrenched 101 employees compared to 13 648 workers in parts of the motor industry is not just flawed, but also self-evidently unreasonable,” a senior automobile executive told the Independent this week.

“It doesn’t make sense to suggest that 13 648 jobs among other players are less valuable than the 292 jobs at Quest and Willowvale. There is, therefore, a serious need to exercise caution in dealing with this issue in the interest of job preservation and saving a sector which contributes a lot to the economy during these difficult times.

“All these jobs need to be preserved through pragmatic and well-thought-out measures which will sustain the whole sector and contribute to the economy at large.

Piecemeal capacitation of feeder activities, for example tyres, cables and upholstery, through duties and taxes may have a devastating impact as the net effects will be mainly felt by the final consumer who is already struggling from economic problems.”

Industry sources also said Willowvale and Quest have no capacity to supply the local adequately.

Willowvale is 60% held by Motec Holdings which in turn is controlled 75% by the state-owned Industrial Development of Zimbabwe (IDCZ) and 25% by Itochu of Japan. Motec also owned Amtec, Autologistic Services and Deven Engeineering. IDCZ has been disposing of its subsidiaries.

Local dealer Quest, which assemblies, imports and deals with car after sales, currently holds the franchise for BMW, Chery, Foton, JMC, Mitsubishi and Peugeot vehicles, as well as Zhong Tong buses. It deals with complete knock down and complete built up units.

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But sources said Willowvale no longer assemblies cars, while Quest’ capacity is now decimated.

“The last car to be assembled at Willowvale 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,” another source said. “There is no local value-addition anymore and no real local components are added, hence there is no justification in protecting the local industry which barely exists under these circumstances.”

“Quest is importing semi-knocked down kits. This is a simple matter of putting together a few panels and components and calling it ‘locally-assembled’,” said the source adding: “In Mutare, it is widely believed that whilst some dis-assembled cars are put together to pass off as locally-assembled, the Cherys and Fotons are largely imported as fully built up cars, only to be pulled apart to pass as completely built up units.”

Industry sources also said the government directive also means Willowvale would have to refurbish the manufacturing assembly plant which needs “in excess of US$20 million to set up”.

“Financially this would not be viable bearing in mind the size of the shrinking motor vehicle sales market in Zimbabwe which stood at 4 300 units for 2014,” another source said. “Mazda 2014 sales amounted to only 240 units, representing 4,9% market share, and these numbers surely do not present a compelling case for investment in a multimillion-dollar plant.”

Documents seen by the Independent show that demand for Mazda vehicles has been falling since 2010 as compared to its competitors.

“Between 2010 and 2014, Nissan sold 5 980 units, Toyota (5 677) and Ford (3 655), while Mazda sold only 2 395, which amounts to only 8,7 % of the market share,” one document says.

Sources say there were industry changes at the Ford Motor Company of South Africa (FMCSA) which led to the split between Mazda and Ford, furher complicating issues.

“The future relations between Mazda and Ford will be that FMCSA will assemble Mazda BT50s on contract only for Mazda out of its plant in Silverton, Pretoria. “In South Africa, the production of Mazdas was restricted to BT50s only,” said the source.

“In fact, Mazda has deliberately pronounced a new policy which dictates that they will assemble their cars in four countries only: BT50s at the Ford plant in South Africa under contract, Thailand, Argentina and passenger cars in Japan.”

Efforts to get comments from relevant industry players were fruitless for different reasons.

 

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5 thoughts on “Govt policy devastates automobile companies”

  1. Angry bird says:

    Typical of a government that has no clue on what is actually on the ground.Every policy of theirs is just scattergun, cross fingers and hope for the best.Pfft!!

  2. Alba Moya says:

    they need to think through these policy pronouncements

  3. Blessing says:

    tax clearance certificates, tax consultancy, fresh company registration(plus tax clearance certificates), all your company secretarial work, quality t-shirts.077 2 560 195

  4. josh says:

    Gvt right for a change. The importation of Toyotas, Isuzus etc is sucking the economy dry.Quest and Willovale will turn the economy in the long run. Economist

  5. fear me says:

    ‘Somebody, somewhere’ must be getting a tidy ‘slice’ of the action. The usual suspects of course !!!!!

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