Almost 20 years ago, the Colombian Automotive Company (CCA) ended the production of one of the most successful cars in sales, the Mazda 323., and also left behind its most distinguished models. In return, he began marketing the modern, better-equipped Mazda 2 and Mazda 3.
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That decision ended the dream of many at the time to get a Mazda because the difference between the price of the beloved 323 with the new ones was enormous. There began a verse further away the horizon of the popular car.
And although that was a strategic move by the Japanese brand, which ultimately gave it good results, today the same situation is being experienced for other reasons, but it is also driving the «popular» car away from buyers, if that is the case. This can be called a very basic model that in some cases exceeds 60 million pesos.
Last December, the motor.com.co portal made a top 10 of the most affordable cars in the Colombian market, comparing their prices six months earlier, that is, in June 2022.
(Also read: The most and least satisfying cars to drive).
There the great jump in prices was already beginning to be reflected. In that span, The cheapest (Renault Kwid) was at 42 million pesos and in December it reached 52. And the car that appeared in tenth place (Volkswagen Voyage) went from costing 52 to 64 million.
And although it sounds repetitive, this price rise was influenced by the 2020 pandemic with all its collateral consequences: closure of production plants, shortage of microprocessors and the container crisis.
To exemplify this process we can see what happened with the prices of the Renault Kwid. They were launched in 2019 in three versions: Life, at $29,990,000; Zen, $32,990,000 and Outsider, $35,490,000. With a dollar at three thousand pesos, on average. Today, four years later, according to the prices that appear on the official Renault website, the Kwid is offered in four versions: Zen ($56,200,000), Intens ($59,990,000), Iconic ($62,200,000) and Outsider ($64 ) ‘200,000).
Another enemy of sales is high interest rates.
Except for the names, some accessories and aesthetic changes, they all have the same bodywork in common and share an identical 1.0-liter 12-valve engine and 66 horsepower. This is normal among manufacturers, but a car with these characteristics, which is the entry point for brands, becomes unattainable for the traditional customer.
And it does not happen only with Renault. recently, Hyundai presented its new HB20 in sedan and hatchback versions, which was the brand’s entry, but which is now premium. Its starting price is 84,000,000 pesos.
Why so expensive?
That cars in Colombia are very expensive is a solid statement that has made a career and it is true, but the price that manufacturers set for their cars is the same for all countries. The big difference is in the taxes that each government imposes on them. In Argentina or Ecuador, for example, the tax rate is higher than 50 percent.
The report ‘Tax Statistics in Latin America and the Caribbean 2022’, prepared by the Center for Tax Policy and Administration of the Organization for Economic Cooperation and Development (OECD), found that countries like Argentina has a tax collection of 29.4 percent of the gross domestic product (GDP); in Chile it is 19.3 percent; in Colombia, 18.7 percent; Mexico, 17.9 percent, and Peru, 15.2 percent.
And the country of origin also affects the price of the cars, the tariffs that are associated with the import tax, which is directly linked to trade agreements and free trade agreements, FOB (Free On Board) value, that is, the value of the car at the port of shipment.
The 21,914 units sold in December 2022 and the 13,872 in January are the lowest in the last 8 and 10 years.
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In Colombia, the border of the ‘popular’ car was not only moved because of the pandemic. Here the behavior of the dollar, inflation, the increase in interest rates and political uncertainty have played a strong role. All these elements have taken their toll on the new and used market, which is why the accounts of the brands for this year were made with caution, and even the sales projections are being adjusted to more realistic figures.
And they are not wrong: the 21,914 units sold in December 2022 and the 13,872 in January are the lowest in the last 8 and 10 yearsrespectively, and there are no signs of improvement.
The ‘popular’ car seems more distant every day for many, but in general cars of all ranges are affected by the skyrocketing costs of freight, insurance, spare parts, after-sales services, training of technicians and forces of sales, which are also valued in today’s dollars.
All these are side effects and their costs are ultimately paid by the customer, who is also accepting the fact that all the safety and pollution requirements make it more expensive to produce a car. Without neglecting the fact that sales of internal combustion cars are paying for the investment of brands in development, engineering and design of electric and hybrid cars.
No credit, no car
The forecasts for the sector are not the best.
Another enemy of sales is high interest rates. Statistics indicate that, on average, almost 80 percent of vehicle purchases are made with credit.
Also, on the one hand, financial entities are now more cautious and demanding in studies and approvals; and on the other, the fear of people with the uncertainty of what could happen with their employment, their income and the fear of getting into debt with high rates.
If a person aspires to buy a zero kilometer car for $64,000,000 and they approve a credit of 32 million pesos, the monthly installments would remain at $1,015,530.48. Financed for 60 months, it would pay $60,931,800 at the end.
Until a few years ago, people came to the showcase with some money, in some cases up to 50 percent of the value of the car and financed the rest, now some are asking for the total financing.
The forecasts for the sector are not the best. For this year the sale of 260,000 vehicles is projecteda modest figure, calculated below the total sales of 2022, when 262,340 units were registered.
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