Protesters challenge gov't restrictions on used cars
By : Juliet D. Golden
Angry used-car importers disrupted a border crossing in Western Poland last week to protest a two-month-old ban on imports of wrecked cars and restrictions on older vehicles.
At the Jedrzyowicz border crossing in Lower Silesia, used-car dealers and repair-shop owners warned that failing to lift the restrictions would lead to the demise of small firms and hikes in unemployment. For its part, the government calculates that the strict measures will spark new-car purchases and ease the effects of what is shaping up to be the worst year in post-communist Poland's nascent automotive history.
"The number of used cars entering Poland have been limited and there are fewer wrecked cars (being imported)," the Economy Ministry said in a press release.
Last week the ministry boasted that the new rules had already begun to bear fruit: Used-car imports have dropped from around 26,000 cars a month to 8,000 in April. If the government fails to yield to protesters' demands and lighten up on the rules, 50,000 fewer used cars will be registered in Poland this year than in 2000. The government said that 200,000 used cars were brought to Poland last year.
"While too little time has passed since the implementation of regulations to evaluate the impact on the car market in Poland, it can for sure be concluded that the basic goals have been met," the ministry said.
For Poland's car producers, the decline in used-car imports provides the only glimmer of hope for turning around car sales after last year's meltdown. After a bonanza year in 1999 when automobile sales reached 640,000, turnover plummeted by 26% to 478,000 units sold last year, according to Wojciech Drzewiecki, president of Samar, an automotive market analysis company.
While industry players thought that sales had hit bottom last year, this year's first-quarter results indicate that the worst may be yet to come.
"We thought this year could be better, or at least that it couldn't be any worse," said Krystyna Danilczyk, spokeswoman at Daewoo FSO Motor, Poland's second-largest car producer. "It turned out that it could be worse, and very much so."
Daewoo sold just 17,278 new cars in the January-March period, down 35% from a year ago, she said. The company is now laying off close to 1,300 employees.
Overall sales of new cars produced in Poland were 50% lower year on year in the first quarter, Drzewiecki said. If numbers don't pick up quickly, auto sales could tumble to as low as 320,000 in 2001, he said.
While car makers and market analysts said the restriction on used-car imports is a step in the right direction, they criticize the government for dragging its feet on the decision. They also argue that if the government treats the measure as a catch-all antidote to combat industry woes, the turnaround for car producers could be years off.
"This move will end up being cosmetic," Drzewiecki said. "If other actions demanded by producers aren't taken, nothing will really change."
Producers are calling on the government to take three measures to boost car sales in Poland. First, the rules on automobile leasing need to be broadened to allow companies to purchase passenger cars under leasing agreements. Under the present rules, companies are only allowed to purchase delivery vehicles under leasing agreements. If rules are extended to include passenger cars, Samar estimates that automobile sales could jump by 50% in the first year after the new rules go into effect.
Producers also say that high interest rates and excise taxes have contributed to the decline in sales. At present, interest rates hover around 21%, Drzewiecki said, about 4% higher than in 1999.
High excise taxes ranging from 6-17% also serve as a key obstacle in improving market conditions. According to Drzewiecki, the doubling in the excise-tax rate last year is the key reason for the fallout in sales in 2000.
Stuck between a rock and a hard place with automotive producers and used-car importers, analysts don't expect the government to make any quick moves to loosen up on any of the rules. With parliamentary elections four months away, any changes in the rules will probably be put off until early next year.
"You could say that for the moment not much is being done," Drzewiecki said. "It looks like the government is holding back in certain areas and is not willing to take any risks."
Angry used-car importers disrupted a border crossing in Western Poland last week to protest a two-month-old ban on imports of wrecked cars and restrictions on older vehicles.
At the Jedrzyowicz border crossing in Lower Silesia, used-car dealers and repair-shop owners warned that failing to lift the restrictions would lead to the demise of small firms and hikes in unemployment. For its part, the government calculates that the strict measures will spark new-car purchases and ease the effects of what is shaping up to be the worst year in post-communist Poland's nascent automotive history.
"The number of used cars entering Poland have been limited and there are fewer wrecked cars (being imported)," the Economy Ministry said in a press release.
Last week the ministry boasted that the new rules had already begun to bear fruit: Used-car imports have dropped from around 26,000 cars a month to 8,000 in April. If the government fails to yield to protesters' demands and lighten up on the rules, 50,000 fewer used cars will be registered in Poland this year than in 2000. The government said that 200,000 used cars were brought to Poland last year.
"While too little time has passed since the implementation of regulations to evaluate the impact on the car market in Poland, it can for sure be concluded that the basic goals have been met," the ministry said.
For Poland's car producers, the decline in used-car imports provides the only glimmer of hope for turning around car sales after last year's meltdown. After a bonanza year in 1999 when automobile sales reached 640,000, turnover plummeted by 26% to 478,000 units sold last year, according to Wojciech Drzewiecki, president of Samar, an automotive market analysis company.
While industry players thought that sales had hit bottom last year, this year's first-quarter results indicate that the worst may be yet to come.
"We thought this year could be better, or at least that it couldn't be any worse," said Krystyna Danilczyk, spokeswoman at Daewoo FSO Motor, Poland's second-largest car producer. "It turned out that it could be worse, and very much so."
Daewoo sold just 17,278 new cars in the January-March period, down 35% from a year ago, she said. The company is now laying off close to 1,300 employees.
Overall sales of new cars produced in Poland were 50% lower year on year in the first quarter, Drzewiecki said. If numbers don't pick up quickly, auto sales could tumble to as low as 320,000 in 2001, he said.
While car makers and market analysts said the restriction on used-car imports is a step in the right direction, they criticize the government for dragging its feet on the decision. They also argue that if the government treats the measure as a catch-all antidote to combat industry woes, the turnaround for car producers could be years off.
"This move will end up being cosmetic," Drzewiecki said. "If other actions demanded by producers aren't taken, nothing will really change."
Producers are calling on the government to take three measures to boost car sales in Poland. First, the rules on automobile leasing need to be broadened to allow companies to purchase passenger cars under leasing agreements. Under the present rules, companies are only allowed to purchase delivery vehicles under leasing agreements. If rules are extended to include passenger cars, Samar estimates that automobile sales could jump by 50% in the first year after the new rules go into effect.
Producers also say that high interest rates and excise taxes have contributed to the decline in sales. At present, interest rates hover around 21%, Drzewiecki said, about 4% higher than in 1999.
High excise taxes ranging from 6-17% also serve as a key obstacle in improving market conditions. According to Drzewiecki, the doubling in the excise-tax rate last year is the key reason for the fallout in sales in 2000.
Stuck between a rock and a hard place with automotive producers and used-car importers, analysts don't expect the government to make any quick moves to loosen up on any of the rules. With parliamentary elections four months away, any changes in the rules will probably be put off until early next year.
"You could say that for the moment not much is being done," Drzewiecki said. "It looks like the government is holding back in certain areas and is not willing to take any risks."
