Government Reliance Worsens Assembly Outlook
One of Zimbabwe's three manufacturing plants, Willowvale Mazda Motor Industries , has now marked a year of suspended production amid debts to parent company Mazda Motor and reports of unpaid wages to workers. BMI believes that reports of recent government purchases of imported , rather than domestically produced, cars will make it even harder for Willowvale to escape the slump, as the private consumer market is very much weighted toward used cars.
According to local reports, the company owes Mazda around US$1.5mn, while there are mixed reports regarding the payment of wages. In order to generate income, the company is said to be selling its stockpile of vehicles. However, BMI believes demand will be an issue here if reports of government ministers importing a fleet of imported vehicles for US$20mn, with rumours of a further US$10mn to follow, are substantiated.
The dynamics of the domestic market mean that government contracts make up a vast proportion of new vehicle sales. If government sales are imported, this vastly reduces the potential demand for domestically produced vehicles, given that the majority of consumers cannot afford new cars. Indeed, a short-lived ban on imported used cars over five years of age was lifted indefinitely in 2011 until the economy improves enough to enable consumers to afford newer vehicles. BMI still expects new vehicle sales to fall 4.3% in 2013, however, in a market which is less than 4,000 units.
|Affordability Creates Rocky Road|
|Zimbabwe GDP Per Capita (US$) And New Vehicle Sales Growth (% chg y-o-y)|