Wednesday, May 27, 2020

Botswana car market is weakening

The country’s used car market which has enjoyed significant growth over the last decade appears to be slowing down, with rate expected to decrease due to waning consumer demand and regulatory changes. 

Statistics Botswana’s recently released Transport and Infrastructure Statistics for 2019’ third quarter shows that motor vehicle registration increased to 18,081, up by 4.9 percent from the second quarter, the largest increase in over a decade.

The third quarter growth was riding on the momentum gained in 2019’s second half, with registrations jumping by 29 percent to 17,239, a major improvement from the first quarter’s sluggish growth.  

As is the case, motor vehicle registrations were fuelled by strong demand for used imported vehicles, representing 84.9 percent of registrations. Brand new vehicles contributed 15 percent. Of the used cars, 77.1 percent were passenger cars with 77.7 percent of the cars sourced from Japan. Botswana’s main trading partner, South Africa, was responsible for 82.5 percent of brand-new cars that made their way to Botswana.

The available data shows that demand for used cars has started to fall. Though vehicle registrations has grown as much as 65 percent between 2008 and 2018, the last five years have reflected weakening pace. In 2015, registrations grew by 11.2 percent, then slowed to 9.5 percent in 2016, and further weakened in 2017 with 5.5 percent growth, and ended 2018 with a growth rate of 4 percent. 

The decreasing pace of growth is attributed to suppressed incomes, rising unemployment, and most recently regulatory crack downs. The Botswana Unified Revenue Services (BURS) has raided used car dealers, seeking to collect custom duties from businesses that are said to under value their invoices, resulting in lower taxes paid. 

Importing cars outside the Southern Africa Customs Union (SACU) attracts a 25 percent import levy plus a 12 percent value added tax (VAT), bringing costs up higher by 37 percent. The car dealers say BURS’s strict enforcement of its valuation methods will drive car prices up, affecting sales.  

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