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Tuesday 23.05.2017 | Name days: Leontīne, Ligija, Lonija, Leokādija

Opinion: what is the fate of used cars in Latvia?

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RULatvia and the entire Baltic region has been a very popular market for used cars dealers from Western Europe since the restoration of independence. The used cars market was rather lucrative in the ‘90s. Even though the inflow of used cars has reduced over the years, imports of used cars in Latvia remain higher than imports of new cars.

«We began actively dealing in used cars set for import to Africa in 2004, when many dealers coursed on the Switzerland-Antwerp –Switzerland route, collecting used cars for exports in Switzerland and new models in Antwerp,» – says head of Kurbads logistical department Kristine Rimene.

In 2009, re-exports of new cars became popular. In 2012, when purchasing power recovered on the local market, this trend dried out. However, the volume of exported cars remained. According to information from Kurbads, exports of used cars from the largest European ports lead to Africa. The lion’s share of those cars is carried to Nigeria.

The used cars export scheme

«Once a week, the big Ro-Ro ferry with 1,000 used cars gathered from all over Europe departs from Antwerp, Rotterdam or Hamburg to the western coast of Africa. The cars carried by this ferry are provided by many different suppliers,» – says one anonymous business individual.

«It is important to make sure the ferry is 100% full. Otherwise the shipping company suffers losses. Because of that, companies often buy additional used cars to fill up storage. Later these cars are realized in Africa at the same prices, which create dumping on the market. It is a big obstacle in this kind of business.»

The Nigerian government has instituted a National Automobile Industry Development Plan, which provides for stimulating local car manufacture industry. The current situation with large imports of cars is considered problematic. This is why the Nigerian government has decided to increase import tax for used cars by 70%.

«It is because of customs that car exports end up in Nigeria’s neighbouring states – Togo, Ghana and Benin. From there, locals deliver these cars to Nigeria.»

«Other popular destinations for used European cars include Libya and Senegal,» – adds Kristine Rimene.

The fate of Latvian cars

«Africans know used cars well. This is why they would rather not buy cars from Latvia or other post-Soviet countries, because technical state of cars from this region is significantly worse than that of cars from Western Europe. This is why it is a lot harder for us to sell cars, so we are forced to draw in potential buyers using lower prices.»

Exports of cars from post-Soviet countries has its specific nuances: «Usually vehicles from Latvian and Estonia are in a poor technical state and/or are filled with all kinds of items. This causes additional problems for us in ports due to additional weight,» – Rimene describes the situation.

«We receive orders from European network members to bring specific cars to one of some of the largest ports in Western Europe. Then these cars are shipped to different destinations.»

Nigeria’s growing car market

Nigeria had a fairly well-developed car manufacture industry in 1970-1985. This was largely due to the country’s declared independence and oil price surge at the time. Unfortunately, the industry gradually declined into nothing.

Used cars that are shipped to Nigeria’s largest ports currently dominate the market. According to information compiled by the Nigerian National Automotive Council, approximately 150,000 used cars are imported, mainly from Europe, every year. With customs and spare parts, this market reaches USD 3.5 billion in value. Only 50,000 new cars are shipped to Nigeria annually.

«If we do not adopt a new policy, pressure on state economy will become unbearable, because even now we are too reliant on imports – it is not the way we want to use foreign currency,» – said Nigerian Industry, Trade and Investment Minister Olusegun Aganga.

Larger economy in Western Africa

Nigeria is the largest economy in Africa with its GDP worth USD 594 billion. In 2012, it took the lead from the previous economic leader – South African Republic.

More than 170 million people live in West Africa, including 15,700 millionaires.

Oil and gas exports (98% of all exports) form the foundation of the economy. What is interesting is the fact that residents of the largest exporter of oil in Africa are forced to wait in long queues at petrol stations…because of fuel deficit.

Notable economic growth is currently registered only in the south east of the country, especially in Lagos, which is the region’s business centre. The north is more under control of by Boko Haram terrorist organization than it is under control by the federal government.

Logistical comparison

According to results of the World Bank’s Logistics Performance Index study, Nigeria was on the 75th place in the world and Latvia was on the 36th place in 2014. This index is meant to help countries identify challenges and options in logistics in order to improve their results.

Nigeria’s largest problems, as mentioned in the study, lie in customs and infrastructure. The same applies to Latvia. However, low logistical performance is only one of multiple reasons why the oil country’s economy does not develop quicker.

Development restrictions

Boko Haram terrorist organization, which stands against Western values, in based in the north of Nigeria. They frequently partake in armed attacks and kidnappings in the region keeping the local populace in a constant state of fear. The Nigerian government seems unable to find resources to combat these terrorists.

Corruption remains one of the most wide-spread problems in Africa. Nigeria is no exception. Corruption is found even on highest level of the government. It is also one of the reasons why the oil superpower has to import fuel in order to satisfy demand. State orders are entrusted to people close to officials in power. Police, who are terribly underpaid, are unwilling to resolve these matters. Instead, they are more interested in making more money.

These are the obstacles that prevent the country from developing at a faster pace.

Ref: 103.109.109.3738


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