Thursday, May 11, 2017

Cuba’s crazy used-car market

Cuba's crazy used-car market
Why it behaves like the prime-property market
The Americas
May 11th 2017 | HAVANA

MULTIMARCAS, a car dealership on the outskirts of Havana, is not a
conventional showroom. On a recent visit it contained one salesman and,
despite the promise of variety in its name, just one car: a 2014-model
Kia Picanto with no miles on its odometer. The price would cause the
most spendthrift American or European to blanch: 68,000 Cuban
convertible pesos (or CUC, each of which is worth a dollar). That is
seven times what a Kia Rio, a similar car, of that age would cost in the
United States, though you would be hard-pressed to find one that had not
been driven.

It is not just virgin vehicles that are startlingly expensive. A Chinese
Geely, listed in Revolico, a Cuban version of Craigslist, with "only
93,000km" (58,000 miles) on the clock, goes for 43,000 CUC. A used 2012
Hyundai Accent costs 67,000 CUC.

Cuba is famous for classic Cadillacs and Chevys that whisk tourists
around, but Cubans would rather drive such banal automobiles as Korean
Kias and French Peugeots, which are more comfortable and burn less fuel.
Cuba may be the only country where the value of ordinary cars rises over
time, even though they age quickly on the potholed roads. That is
because demand is soaring while the supply is not.

Cuba's communists have a complicated history with personal transport.
After the revolution in 1959 they banned almost all purchases of cars
(but let existing owners keep theirs). The government gave cars to
artists, athletes and star workers. High-ranking employees could use the
official fleet and buy vehicles upon retirement at a discount. Petrol
was almost free.

Cuba's hesitant opening of its economy allowed the car market a bit more
freedom. Since 2013 individuals have been able to buy and sell used cars
without official permission. New cars can only be sold in
government-owned dealerships like Multimarcas. The island's spotty
internet access makes it hard for buyers to compare prices. Many find
vehicles by word of mouth and through Revolico, used by individual
sellers and wildcat dealers. Cubans download it via the paquete, a
portable hard drive delivered by courier weekly to their houses.
The rate of car ownership, 20 per 1,000 people, is one of the world's
lowest. The government keeps a lid on imports. It has allowed in 2,000
cars a year for the past five years. But its cautious economic
liberalisation has stoked demand. A new class of entrepreneurs, called
cuentapropistas, is eager to buy, as are Cubans with cash from relatives
abroad. So in the market cars behave more like prime property, whose
supply is restricted, than depreciating machines. One dealer says he has
bought and sold two cars in the past year for a profit of 20,000 CUC,
far more than his 25 CUC-a-month salary from the state. He prefers not
to know much about the buyers: they probably do not declare their money.
A cuentapropista couple in Havana bought a 2011-model European saloon
for 30,000 CUC four years ago and sold it for 45,000 CUC; they traded up
to a used SUV for 100,000 CUC. "We could have got many BMWs for the same
price in the United States," says the wife. Another habanero sold a
house to buy a 25-year-old VW Golf for 10,000 CUC. In ten years its
value has doubled. "I could sell it for a couple of thousand more if it
had air conditioning," he says. A retired engineer bought a 1980s-model
Russian Lada from his state company in 2000 for 160 CUC, and sold it
last year for nearly 100 times the price.
Cubans realise how crazy the market is. Prices are so high, jokes
Pánfilo, a comedian, on government-controlled television, that the
Peugeot lion "covers its face with its paws".

This article appeared in the The Americas section of the print edition
under the headline "Cash for clunkers"

Source: Cash for clunkers: Cuba's crazy used-car market | The Economist

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