Car Dealers: Proposed Ban on Used Vehicles Dangerous to the Economy


Marvin Ayebale (C) the Secretary General of Associated Motor Dealers and other car dealers at the press briefing
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Car dealers in Uganda have warned government against implementing the proposal to ban the importation of used cars that were manufactured before 2011 saying the move will have serious implications on the economy.

They argue that the proposal is rushed and did not consider factors of demand and the economic dynamics within the motor users in Uganda.

The outburst from the private sector follows the provisions under the proposed Traffic and Road Safety Act 1998 (Amendment) Bill 2018 which include banning importation of motor vehicles that are eight years old or more from the date of manufacture. The same Bill provides for variation of motor vehicle registration fees as well as environmental levy on vehicles.

But the car dealers worry that the law leaves their businesses in uncertainty especially given that the demand for new cars is very negligible in Uganda due to cost limitations.

During a press briefing held on Friday at Coin Car Bond in Banda, Kampala, several car importers and proprietors of car bonds vented their opposition to the proposed ban accusing government of crafting policies without due consultations with stakeholders.

Marvin Ayebale, the Secretary General of Associated Motor Dealers said that it is far fetched to think that Ugandans, majority of who are buying used cars on credit will afford to purchase the latest models whose prices are thrice that of vehicles manufactured 18 years ago.

“The biggest question is – are the 2011 vehicles affordable in Uganda? Ugandans are still buying cheaper cars on credit because people have no spending power to pay Shs 16 million at once,” he said.

Affordability

If the proposed ban is effected, a used Vitz (model 2011) will cost Shs 45m compared to the 2000 model that costs Shs 16m. A Toyota Premio (2011) will cost Shs 65m from Shs 19m.

A Hiace Van will go up by Shs 35m while the price of a Land Cruiser Prado model 2011 will increase four times compared to the model 2000.

The dealers argue that the current model provide cheap transport compared to the 2011 models proposed by government which they say will create scarcity and eventually prompt unprecedented transport costs.

It should be noted that of the 50,000 cars that Uganda imports annually, only 10% of these cars are in the 8 year limit (manufactured in 2011 to date). And these new models are largely purchased by government agencies, NGOs, embassies and a few high Net individuals.

Charles Mwebembezi from the Uganda Freight Forwarders Association said; “We are not against the proposal but how it is being implemented. Things must be gradual. People already have businesses and budgets. You can’t suddenly increase a Vitz from Shs 16m to Shs 45m”.

Ayebale added that beyond the question of affordability, the proposed age limit on the importation of used motor vehicles will render thousands of Ugandans jobless if implemented. The businesses likely to be affected include car bonds, insurance firms, spare part sellers, number plate manufacturers, garages, clearing and forwarding agents among others.

“More than 11,000 people are currently depending on this industry and each of these people has a family to fend for. Where are the alternative jobs that government is willing to avail for these people? Ayebale asked.

In addition, he said, several indirect services like restaurants, security, banks, transport and logistics providers, fuel stations are also going to be affected by the ban.

“It should be noted that a big number of companies are operating on loan facilities from banks that were acquired to set up business. A sudden shift in policy would be disastrous,” a petition drafted by the private sector states.

The joint petition was issued by seven Associations including Associated Motor Dealers, Used Car Dealers Association of Uganda, Association of Car Bond Owners and Operators and Spare Parts Dealers Association.

The others are Uganda Clearing Industry and Forwarding Association, Uganda Freight Forwarders Association, and Regional Lorry Drivers and Transporters Association.

They say that 95% of the companies operating in the motor vehicle industry will be forced to close doors.

Important to note is that government draws an annual income of Shs 180 bn from imported cars.

“The tax that would be lost from over 45,000 units coming in is in billions of dollars and would be channelled to developing infrastructure and mass transportation systems that would later achieve the intentions of the proposed amendment as industrialization in the auto mobile sector takes root,” the petition reads in part.

Environment

While environmental related concerns have been central in previous debates by those opposed to the importation of used vehicle, the private sector is not convinced by the argument. They argue that motor vehicles are subjected to sufficient exhaust emission tests both in the country of origin and upon arrival in Uganda.

“All cars that undergo this inspection are inspected upon arrival in Uganda in addition to a heavy penalty of 15% of CIF value as a punitive surcharge for avoiding inspection at point of origin,” the Associations say in their petition.

In making their case, they say that most of the vehicles in Uganda are imported in sound mechanical condition but a poor maintenance culture by many local users leads to quick wear and tear.

One of the dealers who attended Friday’s press briefing wondered why government was so concerned with air pollution which in his view is the least among Uganda’s problems. He suspects that government is only using the environmental factor as an excuse.

In their petition, the private sector are demanding that government implements the proposal in a phased manner by starting with the banning of used car models that are 15 years from their date of manufacture for end user subsistence vehicles and 25 years for goods transportation vehicles.

They also propose that government enforces mandatory annual motor vehicle inspection to minimize environmental damage. They suggest that vehicles that do not pass the routine inspection be sold as scrap to support the automobile industry.

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