The Chinese cars that are changing Cuba

The Chinese cars that are changing Cuba
Matt Clinch | @mattclinch81
Thursday, 18 Dec 2014 | 4:53 AM ET CNBC.com

The U.S.'s efforts to normalize relations with Cuba could eventually
lead to an influx of American imports into the country. But when it
comes to automobiles, one country has got there first: China.
Cuba has long been known for its 1950s American cars lining its streets,
but Havana is now home to a small, but growing, number of brand new
Asian automobiles which are altering the landscape.
Until recently, Cubans' choice of vehicles had be somewhat limited.

After being hit by a U.S. embargo in 1960, residents have lovingly
maintained a plethora of American Pontiacs, Buicks, Chevys and
Cadillacs. The Communist country's close ties with the former-Soviet
Union also means that there's also a large fleet of Russian Ladas from
the 1970s and 1980s that outnumber the older American models.
But among the relics, a clutch of Chinese-made Geely CKs and South
Korean Kias have found a home, after new laws that came into effect in
January removed the limits on car purchases for the first time in 50 years.

Even before the reforms, workers at government ministries were allowed
to import the cars, meaning that 10,000 Geely units were already in the
country, according to China's Global Times, which cited statistics from
the car manufacturer.

The Chinese company accounted for 50 percent of car imports in Cuba by
the end of 2013, according to the newspaper, equal to the combined share
of Kias, Peugeots and other brands.

But there's a problem facing many ordinary Cuban consumers tempted by
one of these Asian motors: the price.
Using the Cuban convertible peso (CUC) - which is equivalent to the U.S.
dollar and is used by tourists and the more affluent Cubans - a new car
can be pricey. A vehicle that might cost the equivalent of around 20,000
CUCs ($20,000) in the U.S. or Europe would be worth around 80,000 CUCs
in Havana.
"These vehicles are still very expensive and out of reach. Property
transfer operations in Cuba are heavily taxed," Diego Moya-Ocampos, a
country analyst at research firm IHS who deals specifically with Cuba,
told CNBC via email.

"The (Cuban) government is trying to fund public transport from revenues
it collects from car sales. 75 percent of revenues and taxes from car
sales are allocated to public transport funding. This significantly
increases its costs in comparison with acquiring a vehicle outside Cuba."
Consequently, not many new vehicles have been sold in the last year. A
report by Reuters in June - crediting information from Cuban website
Cubadebate.com - stating that just 50 cars and four motorcycles had been
sold in the first six months of the year. There are only 11 car
dealerships in Cuba, with 4 in Havana, according to Moya-Ocampos.

Cold war finally over?

Mauricio Alonso, proprietor of a Havana-based holiday home, is one of
many small business owners that have sprung up over the last five years
after a package of reforms by Cuban President Raul Castro.
He told CNBC that price markups were a way of life, with even a liter of
cooking oil costing around 200 percent more in Cuba.
"Even in the comedy shows screened on Cuban (government) TV, the
comedians make jokes about this," he said. "I understand that the Cuban
government doesn't have any other choice."
Alonso said on Wednesday that he had been celebrating with his
neighbors, following President Barack Obama's move to improve its
relationship with Cuba.

The cold war between Cuba and the U.S. is "finally over," Alonso said,
but stressed that the announcement was unlikely to mark the death knell
for Cuba's classic American stalwarts.
"Some of the old cars working as taxis are really dangerous and big
polluters. The authorities want them to fulfill higher standards," he
explained. "But to replace the old cars would take a long time and cost
a lot, many of them are still in good shape and are tourist attractions."
For now, Alonso is content with his 1984 Russian-built Moskovich,
despite his two neighbors both having brand new cars.
"(It's) not very efficient but very strong and resistant and I still can
find spare parts," he said.

Source: The Chinese cars that are changing Cuba -
http://www.cnbc.com/id/102279510#.