MEXICO CITY: Salesmen outnumbered customers by many factors at El Hoyo, a vast, dusty used car lot on the south end of Nogales, Sonora.
Miguel Angel Gaxiola and Luis Barreras, both resting under a carport to keep out of sun, said that while business has rarely been great in recent years, it has gotten even worse in the wake of a dramatic decline in cheap used car imports from the United States. Used cars from north of the border make up a sizable portion of the inventory at El Hoyo, both Gaxiola and Barreras said, but they have become pricier in the wake of recent regulatory changes.
“With the imports stopped, now we’re buying cars that are already imported and legalized,” Gaxiola said. “That’s how we support ourselves now.”
The 59,952 used cars imported into Mexico between January and May is trending far short of the 363,303 that were brought into the country from January to August 2014. A local representative of Mexico’s Federal Tax Authority (SAT), the agency that regulates such trade and provided these statistics, said he could not provide specific data for Nogales ports of entry. However, several area businessmen said that the city has experienced similar declines, which have had impacts on businesses on both sides of the border.
The drop in imports is due to a number of factors, but perhaps most importantly, several recent Mexican Supreme Court decisions have whittled away legal injunctions that allowed for the importation of used cars with few restrictions and at low cost. Many such injunctions remain, but the effect of those that have been struck down has been significant, industry leaders say.
Eduardo Solis, president of the Mexican Automotive Industry Association (AMIA), recently told the newspaper Milenio that 95 percent of used car imports in recent years have been carried out under the injunctions, or amparos.
Additionally, among other measures, SAT has restricted the hours that used cars can be imported and the model years that can be processed, which are currently limited to 2006 and 2007. In a news release on the decline of used car exports to Mexico, the agency said that the measures “favor the growth of the national economy to the benefit of the automotive industry and the entire population.”
The AMIA has long criticized used car imports, which it says undercut the domestic auto industry and fill Mexican roads with low-quality vehicles. New car sales in Mexico this year are up significantly since last year, according to recent news reports.
Buying two cars
Like a number of other local customs brokerage operations, the Joffroy Group pulled out of the used car export business in late 2014 as a result of the changes, said Luis Chavez of the company’s Nogales, Ariz. office.
In addition to more limitations on used car exports, costs have also increased for importers, Chavez said. In years past, importers paid about one-third the value of the vehicle for all the steps required to bring it into Mexico legally, he said. Now, those costs are doubled.
“If you pay $2,500 for a car…you have to pay another $2,000 to get it imported. So you’re buying two cars,” he said.
It cost between $1,000 and $1,500 to import cars into Mexico using an injunction. Without one those costs can range from $2,000 to $8,000, depending on the value of the car, Chavez wrote in an email.
He added that the decline of used car exports has had significant consequences for area businesses.
“I know about more than 100 people that don’t have work right now because they depend on (this) kind of paperwork,” he said.
Representatives from Genesis Auto Sales, Salazar’s Freight Forwarding and Alex’s Tire Pros, all in Nogales, Ariz., also told the NI that they have lost business in recent years as a result of the declines.
“It just kind of fizzled,” said Juan Carlos Salazar, owner of Salazar’s Freight Forwarding, of the changes in the business in recent years.
Salazar said he pulled out of used car exports several years ago, when the injunctions against the regulations were first issued. He said he was afraid that if they were overturned, as many have been recently, Mexican authorities could go after customs brokers for the lost tax revenue.
“There was a risk involved,” he said.
Back at El Hoyo, Gaxiola and Barreras said they were skeptical that Mexican consumers would benefit from the drop in used car exports. They didn’t see much benefit for the country’s automotive industry, either.
“Not everybody has the economic opportunity to buy a new car,” Gaxiola said.
“Eighty percent of the country’s inhabitants can get a used car,” Barreras added.
Looking around at a lot full of cars but short on customers, Gaxiola said: “neither the buyer nor the seller is winning.”
