Friday 18 June 2021

A bare-bones 2012 Toyota Corolla is worth nearly US$40,000 in Caracas today

Used Vehicles Do Not Depreciate in Venezuela, shooting up 100 percent in value since January (Photo courtesy of: Noticias 24)
Used Vehicles Do Not Depreciate in Venezuela, shooting up 100 percent in value since January (Photo courtesy of: Noticias 24)

TODAY VENEZUELA – Given the decline in vehicle production, which in October 2014 stood at 81.6% according to the Venezuelan Automotive Chamber, and therefore, given the lack of availability of new cars, used cars are revalued rather than depreciate as naturally occurs in any other country.

Global investors are always hunting for tips on emerging markets. Making money in the submerging markets of Venezuela is a little different.

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The struggling South American country has one of the world’s highest inflation rates, 63 percent, and its industrial output has imploded in recent years, mostly the result of convoluted foreign-exchange controls and a wave of nationalizations by the socialist government.

Yet there is one thing Venezuelan investors are plenty bullish on these days: used cars. On the consignment lots of Caracas, they make Google shares look sleepy.

The value of used vehicles has doubled in the past year, dealers say, because virtually no new cars are entering the country and local assembly plants have been paralyzed.

Consider: A bare-bones 2012 Toyota Corolla is worth nearly $40,000 in Caracas today, shooting up 100 percent in value since January — and that’s the price in U.S. dollars, unrelated to the runaway inflation that plagues the local bolivar.

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Venezuelan car dealers say many of the vehicles are being bought and sold to outrun inflation pressures, not to get around town. While U.S. dollars can offer a safe harbor for one’s life savings, they cannot generate profits like a truly scarce resource, in this case family passenger vans and late-model SUVs with chrome rims and leather seats.

“I think this must be the only country in the world where a car drives out of a dealership and goes up in value,” said Rosa Rosales, sales manager at one Caracas car lot.

The boulevards of the city’s wealthier districts are still dotted with showrooms that once stocked new Chevrolets, Mitsubishis, Fords and other brands. Today those showrooms are empty, their ground floors bare and their employees sitting idle and watching TV.

Venezuela’s once-busy assembly plants are on pace to produce just 15,000 vehicles this year, down 82 percent from 2013, according to the nation’s auto manufacturing trade group. That is just 6 percent of the industry’s production capacity, the carmakers say, blaming a lack of raw materials and parts, along with $2 billion stuck in Venezuelan banks that the government will not let them exchange into dollars.

One dealer complained about having to pay bribes to union officials at the plants to secure a few of the scarce vehicles that do roll off the assembly lines.

Venezuelan officials say they are eliminating some of the paperwork that has been choking imports. They also have set up a waiting list for the Chinese-made models appearing lately on Venezuelan streets, such as the Orinoco sedan.

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Because those cars are sold for just a few thousand dollars, their black market value is four or five times their dealer price, and Caracas car dealers complain that the list-managers are pocketing a fortune in kickbacks.

Really, the only places in Caracas that regularly have cars in stock are consignment lots such as Rosales’s, where a 2011 Ford Explorer with 25,000 miles on the odometer sells for 4.8 million bolivars. That’s $790,000 at the official exchange rate, or about $50,000 using the black market rate.

Prices are even more extreme at a consignment lot in another Caracas district. A 2012 Toyota 4Runner there was listed there for 13.5 million bolivars, which is more than $2.1 million at the official rate ($135,000 at the black market rate).

The vendor pointed out that the vehicle was armored, which adds about $20,000 to the sale price. Venezuela has one of the world’s highest homicide rates, so vehicle armoring has been a growth industry, though with the country’s steel mills crippled, supplies can be tight.

There were other models on the lot, including a 2012 Range Rover selling for about $130,000 (at black market rates). Venezuela’s state-subsidized gasoline is the cheapest in the world, at less than a penny per gallon, so SUVs are prized.

Bringing them into the country is another matter. One dealer illustrated the difficulties of acquiring new inventory.

He said he’d purchased a $45,000 SUV in Florida and had it shipped but had to fork over $30,000 in bribes and fees once it arrived. He still expected to turn a tidy profit, saying the vehicle lasted a single day on the lot before it was sold.

The dealer spoke on the condition of anonymity, because, he said with a grin, “a lot of my customers are government officials.”

Article first appeared on TodayVenezuela.com

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FACT CHECK:
We strive for accuracy in its reports. But if you see something that doesn’t look right, send us an email. The Q reviews and updates its content regularly to ensure it’s accuracy.

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"Rico" is the crazy mind behind the Q media websites, a series of online magazines where everything is Q! In these times of new normal, stay at home. Stay safe. Stay healthy.

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