Suzuki vehicle prices explode, shaking auto industry | The journalist

Yoseph Asfaw, a middle manager at one of Bunna Bank’s branches, was delighted when he found out he was eligible to take out a two million birr interest-free loan, thanks to his branch’s performance over the course of the year. of the previous year. He did not hesitate to seize the opportunity. After a few weeks of deliberation on what to buy with the money, he decided to purchase a vehicle. His choice fell on the 2022 model of the Suzuki Dzire, the most sought-after automobile on the automotive market. He was asked to pay 1.5 million birr.

“Are you sure I’ll get the money back in a short time,” Yoseph asked the car dealership.

“Trust me, give it a month and the price will be over two million birr,” the retailer replied.

The trader was right. The price of Dzire 2022 has soared to 2.2 million now, a development that has helped Yoseph turn a profit of 700,000 br in just one month. “You cannot get this money by saving or opening a trade store. And that’s not at all surprising, given the volatility of the market,” the banker said, adding, “I don’t want to sell it because it’s a treasure whose value is appreciating every second, and the ‘most profitable business without adding value’.

It is not uncommon to see vehicle prices skyrocket in Ethiopia. Cars are considered a great treasure, just like apartments or houses. A car that costs less than $2,000 in neighboring countries, the Toyota Vitz, costs nine times as much in Ethiopia. The high tax on old cars, which could reach 500%, was used to justify the increase. While the same is true for old cars, the situation is different for new vehicles, a category given to automobiles produced within three years of imports.

Three years ago, the government introduced a new tax law to encourage imports of new cars while discouraging old ones. Such reform was aimed at making new cars cheaper, although this was a goal that never materialized. A typical example is the 2022 Dzire, an automobile imported under a duty-free program that flooded the market, along with other Suzuki brands including Espresso and Swift.

Toyota is still the dominant player in the vehicle market, although marketers say Suzuki is now taking the lion’s share, probably up to 60% over the past two years. This is partly because the cost of new Toyota vehicles is higher than in the past, as old ones were less expensive. For the same reason, Suzuki is now the preferred brand for importers, because the lower the cost, the lower the amount of foreign exchange importers need to obtain.

“We get parallel market forex at a premium because banks barely cover the cost of imported cars. Suzuki has become a preferred option for many importers as it is less expensive and brings better return with higher profit margin than Toyota which is expensive and requires a tedious process to obtain the necessary foreign currency to import it from countries like Dubai said one importer.

Last year, the demand for new vehicles increased, largely due to the huge amount of financing provided by banks to eligible borrowers to take out a loan to buy an automobile. In the third quarter of last fiscal year, 330 million birr was imported, double what was imported in the previous quarter. It is also 20% higher than what was imported during the same period in 2020/21. The increase is the result of growing demand in the market, according to retailers. But this has a cost.

“The demand is far greater than the supply. We are receiving more orders than what is available in our stock,” said Ezra Hailemariam, marketing director of Tamrin, a major player in the automotive market and known for importing Suzuki brands.

Global market developments also contributed to the price spike, according to Ezra.

“More than 90% of Suzuki cars are imported from India, which is currently not producing much due to a shortage of inputs due to the tension between China and Taiwan, which is the main supplier of semiconductors for factory in India,” added Ezra.

According to a senior company official, Maruti Suzuki said “it could not produce 51,000 units in the April-June quarter due to the current chip shortage situation.”

India’s biggest automaker, which sold 1.4 million vehicles this year, pointed to semiconductor shortages as a challenge in planning its production activities.

“Shortages of electronic components continue to limit our production volumes. During this quarter (Q1), the company was unable to produce 51,000 vehicles,” Maruti Suzuki India (MSI) Chief Financial Officer Ajay Seth said in an interview with local media in India.

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