Impact of Ecuador's 0% car import tax

Although Ecuador's tax breaks on cars coming from Colombia and the European Union have increased vehicle imports and improved sales in the Andean country, they are holding back domestic car production, according to the association of autmotive companies in Ecuador, Aeade.

From January-April of this year, the market share of cars being imported into the country increased six percentage points to 71%, while the market share of cars being assembled in Ecuador went down six percentage points to 29%. This trend is expected to continue in the short to mid-term, local paper El Telegrafo reported.

Sales, however, are making a comeback as 2017 showed a 65% jump to 105,077 vehicles. from only 63,555 units in 2016 (a recession year). The country still has much more to go for a full recovery, according to Aeade president Genaro Beldeón, explaining in the report that 141,154 units were sold in 2011. 

As for 2018, the trend has been continuing as 43,756 vehicles were sold in the first four months of the year. Of this amount, 29,780 units - equivalent to 68.1% - were imported vehicles.

From January-April, sales from Colombia imports increased 85% year-over-year to 4,476 units, making up 11.2% of the market, while sales from Europe imports jumped more than four-fold to 2,779 units, being 6.4% of the market. 

Imports have been on the rise since Ecuador's recession in 2016. While January-April imports from Colombia were 2,057 units in 2017 and 1,084 units in 2016, imports from Europe were 708 in 2017 and only 204 in 2016.

Cars coming from Colombia already benefit from a 0% import tarriff, while Europe has a gradual tarriff reduction scheme which started on January 1, 2017, set to reach 0% by 2023. 

The Brands

In 2017, Chevrolet led sales with 41,101 vehicles leaving dealer showrooms,  equivalent to 39.1% of the market.  The US automaker was followed by Kia with 18,223 units (17.3% of the market), Hyundai with 9,443 units (9.0%), Great Wall with 6,792 units (6.46%), and Toyota with 4,809 units (4.57%). 

Other OEMs holding market share - in order - were Nissan, Hino, Ford, Mazda, Renault, Volkswagen, Chery, JAC, Citroen, and Zotye.

Considering automakers assembling the most cars in Ecuador this year, General Motors - as of January 2018 - led by far with 68% of market production. It was followed by Ciaauto with 46%, Kia (27%), Volkswagen (26%), and JAC (10%). Both Volkswagen and JAC were producing no cars in the country last year. 

2019 Chevrolet D-Max, a top-selling pickup in Ecuador (Source: GM)

Fleet Cars

Besides government agencies and car-rental companies, most fleet vehicles in Ecuador are from companies operating in the oil, transport, agriculture, telecommunication, and consumer product trading industries. Fleet sales, by vehicle segment, are cars (42%), pickups (24%), SUVs (18%), trucks (12%), and vans (4%).