Expert: Cesar - 8/28/2007

Question
My family is in the used car business, we sell to dealerships and at auctions.We had a interest in exporting late model cars to other countries maybe Costa Rica,Panama or Colombia.I was born in Colombia, so have I family and contacts there. I was wondering what are the car import policies of the these countries and which would be a better business opportunity.

Thanks,

Fabio

Answer
Dear Mr. Mazo:

In Colombia the import fees are pretty high. I heard of 40% of the price of the car, but I cannot certify to that rate/fee, customs would. I believe that due to the high fees the importers have decided not to have/run that business in Colombia. I think the national automotive industry is heavily protected.

I see a lot of Renault cars in Colombia (at least before). It has been one of the most sold cars in Colombia. On the later years I have seen other companies such as Nissan and other import company (I believe Audi or something like that) establish dealerships in several main cities.

Cars in Colombia are very expensive, even the old ones. I wish (and probably others too) that many more options for purchase of a car would become available. A very old car would sell for much more here. I saw a 20 plus year old Ford Fairline that I bought for $500 twenty years ago being sold for $1500 dollars two years ago (3 million pesos). There is also a good market for motorcycles here since they are expensive too and there is a good demand for them (people can afford motorcycles more than cars). A lot of young people want and purchase motorcycles here, specially used ones.

Since cars are very expensive here, companies would still make money here despite of the import fees. You just have to run the numbers. I do see expensive cars here that people manage to be able to purchase. My only concern would be able to handle the parts part of the business since hardly anybody would want to buy a car for which the parts are hard to obtain. I suggest the business to pretty large companies such as Ford that can afford to establish dealerships with parts departments. In your case I would suggest importing cars that would have parts available (that is, cars that are already being sold here, your advantage would be if you are able to sell those same cars for less and hopefully on credit or have someone handle the credit purchases).

I have been at car dealerships such as Nissan. They are not heavily visited. I also hardly see used car dealers. There are not too many car dealerships like in the US. Their inventory is not big either. They would have a few cars to choose from. They might even sell by showing a model and mentioning the available colors. Having from one to 5 or 7 cars on display (one car at a shopping center, 5 at a Nissan dealership, one for each model). Used dealerships might have say 8 to 10 cars, occasionally more. That means not a lot of budget for a large inventory. Salespeople would most likely work on a commission only basis or the dual arrangement of basic plus commission, but the salaries here are pretty slim. I asked Nissan salespeople about how they manage to sell. They said that they visit employers and talk to the employees (I suppose they set a table with signs, have applications for credit available, and explain the requirements for being able to purchase a car).

I am not familiar with the car business in Costa Rica and Panama. Panama is a country where a lot of ships go thru and possibly would have an easier time getting imported goods. Costa Rica and Colombia are not far from there. I do not know the custom regulations in Costa Rica and Panama.

You should contact someone with a degree in International Business or better yet a company that does that. They should be able to give you advise for a fee or be the ones that would handle the import paperwork for you. They should be able to find out for you the costs of exporting to other countries such as the ones you mentioned.

Regards,

Cesar
CesarCalifornia@hotmail.com
(818) 206-0481