The poor performance of Tanzania’s currency in the forex market, compounded by consequential increment of customs on imports has slapped the auto industry in the face, with prices of popular brands including Rav 4, Noah and X-Trail going up by between Tsh2 million and Tsh7 million.
The current rate of the currency vis-a-vis the dollar is 1636, which is a depreciation of 5 percentage points in comparison with the first quarter of 2012.
Majority of auto dealers in the city of Dar es Salaam link the instability of the currency and the rise in duty surcharges to the sharp decline of sale figures by margins from 40 to 60% in a timeline extending between sixty and ninety days in the recent past.
The situation has seen many of the dealers cease importation of further supplies while buyers are manifesting that they are feeling the blunt of the higher costs by not flexing their purchasing muscle.
“We haven’t sold a car in January,” were the remarks of Mr.Charles Mtawali, the head of C.M. Company, implicitly underscoring the relatively low number of sales where January 2012 saw a median sale rate of ten vehicles, but twelve months down the line, the margin had gone down to a paltry four.
Tanzania Car Purchase Demographics
Tanzania as a country has few vehicles because most potential buyers in the independent sector cannot be afford brand new automotives, making them fall back on secondhand. Statistics show that dealers have mainly to market their new wares to corporate and state institutions through order subscriptions.
Business Monitor International (BMI) recently ranked Tanzania at number 16 in the Risk/Reward Ratings report, a position that reflects the lack of affinity with the country’s universal GDP growth rate, which had hit 6.4 percent in Quarter 3, 2011, the date of the report. BMI provides critical analysis, based on intelligent quotients, on various governmental and corporate issues that make prospects risky or favorable for investment.
Despite these huddles, the Tanzanian auto market is brimful of opportunities and has attracted foreign interests including Hero Honda, a motorcycle maker from India, which had planned as early as the beginning of 2012, to set up an assembly point inside the country to cater for the yawning demand in rural communities in need of flexible transportation.
There are also firms that have enjoined their assemblies in the country courtesy of the country’s position to enjoy free Common Market privileges in the EAC bloc that consists of five neighboring nations.
The prospects are also looking up for Tanzania as Gulf and Eastern Asia companies reach out to use the port of Dar es Salaam as a conduit through which to face off with popular far-east brands like Toyota.