Car dealers look to a better year despite huge challenges

Car dealers are optimistic they will record better returns this year despite the many challenges the sector faces.“The economy is projected to grow by 7.5 per cent this year, which implies that people’s purchasing power will increase. This could mean that more Rwandans will want to buy cars since they will have more money to spend,” Dario Simbizi, the Rwanda Motors commercial director, said.He added that the sector would build on last year’s gains to post good sales. Felix Singama, the ATC Rwanda commercial director, said the country’s growth agenda under the second phase of the Economic Development and Poverty Reduction Strategy (EDPRS II) would create new business opportunities for the industry.“A stable economy with vibrant business opportunities is important to maximise sales,” he said.Although Rwanda motor vehicle dealers say 2013 was a good year, the situation was different on the global level. For instance, shares of Hyundai and affiliate Kia Motors, a company that opened shop in Rwanda recently, recorded the lowest growth in nearly a decade.Their combined sales are expected to grow by 4 per cent to 7.86 million vehicles this year, lower than 6.2 per cent growth the two firms posted last year.However, Robert Kayombya, the Sarwatraco managing director, said car dealers are struggling because of high taxes and delay in getting value added tax (VAT) refund from the tax body.“We are optimistic, but the sector is still being plagued by a lot of challenges, including high import taxes and bureaucracy while processing VAT refund. “Therefore, we might not see any difference in sales even if people’s purchasing power increase, if these challenges are not addressed urgently,” Kayombya, who is also the vice-president of the Rwanda Car Importers Association, said.Sylvester Zacharia, the Rwanda Hyundai finance manager, called on Rwanda Revenue Authority (RRA) to hasten the process of VAT refund so that they use the money to reinvest into their businesses. Importers pay 10 per cent of the car’s value for vehicles with 2.5 cubic centimetres (cc) to 3cc, while those with 4cc to 4.5cc pay 15 per cent of their value as tax. Kayombya said this is too high and is pushing them out of business. If an importer fails to clear a vehicle within 15 days, they pay a 4 per cent of the tax as storage charge to customs. The average tariff on vehicles, such as small cars, trucks, motorcycles, as well as non-motor vehicles is 8.6 per cent, according to the 2011 World Trade Organisation (WTO) report. Last year, car dealers called on the RRA to reduce taxes, saying high fees were suffocating their businesses.According to RRA customs policy, the custom duty and other taxes on imported cars are levied basing on the cost insurance freight (CIF) value of the car.

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Car dealers look to a better year despite huge challenges