Friday, August 8, 2014

Venezuela: Auto Dealerships Shuttering Their Doors, Scarcity of Dollars Impact on Auto Parts, Too

According to The Latin American Tribune and EFE, a sharp plunge in auto output in Venezuela is causing car dealership closures, threatening hundreds of jobs and severely hindering would-be customers’ ability to purchase vehicles.

“After 43 years, we’ve closed our doors because there’s nothing to sell,” Caracas’ well-known Lino Fayen dealership announced this week, in the latest sign of the burgeoning crisis.

A seller of Nissan-brand vehicles for more than four decades, the dealership said it was temporarily shuttering its operations due to a lack of vehicles and replacement parts to sell.

Venezuela is facing shortages across multiple industries stemming from currency restrictions imposed by the government, which has a monopoly on access to US dollars.

The auto sector has been particularly hard hit, with vehicle production plunging 84%, thus far this year relative to the same period of 2013 due to a lack of hard currency to pay parts suppliers, according to the Cavenez industry association.

“Production has been zero or practically zero. Now there’s no way the dealer can meet customers’ requests; even keeping a waiting list makes no sense,” José Sanabria, a representative of a Toyota dealership told EFE.

COMMENT: The auto sector’s woes date back many years. Production fell 58.2% from 171,715 vehicles manufactured in 2006 to 71,753 vehicles in 2013, according to Cavenez.

Despite the lower output, Industry Minister José David Cabello said in April that the government’s goal is to bring an end to vehicle imports, ensure that all parts that assemblers need are produced in Venezuela and even “reach the level of exporting vehicles.”

Two of the seven auto plants in Venezuela (Chrysler and Mack) have shut down production entirely, while Italian industrial vehicle manufacturer Iveco assembled just 60 vehicles in all of July after not producing any for three months.

Venezuela’s auto industry has an installed annual capacity of 250,000 vehicles, but has only manufactured 7,023 thus far in 2014, Cavenez said.

The auto parts industry is in a similar crisis, with production tumbling by 84% thus far this year compared to 2013, also due to lack of access to dollars.

The sharp drop in production has put hundreds of jobs at risk, with companies submitting 1,500 layoff requests to Venezuela’s Labor Ministry.