Peru

Last modification: 1 Sep 18
Introduction: 

Peru is composed of 25 regions and 1 province*. They are Amazonas, Ancash, Apurimac, Arequipa, Ayacucho, Cajamarca, Callao, Cusco, Huancavelica, Huanuco, Ica, Junin, La Libertad, Lambayeque, Lima, Lima*, Loreto, Madre de Dios, Moquegua, Pasco, Piura, Puno, San Martin, Tacna, Tumbes, and Ucayali

Poverty and unemployment levels have fallen dramatically in the last decade, and today Peru boasts one of the best performing economies in Latin America.

Thank you to contributors to the Peru WikiFleet page: BDO: Arval-Relsa

Chapter 1: Economic and business environment

Demographics

Population 31 million people (July 2017 est.)

Peruvian emigration began rising in the 1980s due to an economic crisis and a violent internal conflict, but outflows have stabilized in the last few years as economic conditions have improved. Nonetheless, more than 2 million Peruvians have emigrated in the last decade, principally to the US, Spain, and Argentina.

Capital

Lima (population of 9.87 million)

Major cities

1. Lima (9.87 million)
2. Arequipa (1.26 million)
3. Trujillo (850,230)
4. Chiclayo (799,034)
5.Huancayo (659,300)

Languages

Spanish (official) 84.1%, Quechua (official) 13%, Aymara (official) 1.7%,

GDP

US$210 billion (2017 est)
US$6,774 per capita 

Unemployment rate

6.7% (2017 est.)

Main industries

mining and refining of minerals; steel, metal fabrication; petroleum extraction and refining, natural gas and natural gas liquefaction; fishing and fish processing, cement, glass, textiles, clothing, food processing, beer, soft drinks, rubber, machinery, electrical machinery, chemicals, furniture.

Agriculture
artichokes, asparagus, avocados, blueberries, coffee, cocoa, cotton, sugarcane, rice, potatoes, corn, plantains, grapes, oranges, pineapples, guavas, bananas, apples, lemons, pears, coca, tomatoes, mangoes, barley, medicinal plants, quinoa, palm oil, marigolds, onions, wheat, dry beans; poultry, beef, pork, dairy products; guinea pigs; fish

 

Currency

Peruvian Sol
currency code: PEN

Interest rate

Central Bank discount rate
4.25% (31 December 2016 est.)

Political key info

Pedro Pablo Kuczynski Godard won a very narrow presidential runoff election in June 2016. Facing impeachment after evidence surfaced of his involvement in a vote-buying scandal, President Kuczynski offered his resignation on 21 March 2018. Two days later, First Vice President Martin Alberto Vizcarra Cornejo was sworn in as president.

Inflation

3.2% (2017 est.)

Chapter 2 : Automotive market, segments & sales

Total Car park

Approximately 2.77 million vehicles (one in 11 inhabitants, est. 2017)

Average vehicle age is 13 years

 

New vehicle registrations (Cars, LCV, Trucks)

2017

While Peru's general car sales market rose nearly 10% year-over-year in 2017 to 180,281 vehicles, the premium market reported a 20% rise, led by Mercedes-Benz. In 2017, Mercedes-Benz sales jumped 40% to approximately 1,400 units (32% of the overall premium market). The german automaker is expected to see growth of some 25% in 2018.


2018

Since April, car sales has been falling. In June, passenger car sales dropped 26% and SUV sales dropped 25%. Sales has been impacted by the increase of the selictive consumption tax ISC on new gasoline vehicles which rose to 10% from 0%.

Top 5 brands (total market)

1. Toyota 29,703 sold in 2017 (17.5% market share)
2. Hyundai 27,396 units (15.2%)
3. Kia 20,525 units (11.4%)
other brands 102,657 vehicles (57.9% of the market).

Source: AAP

Model preference top 5 (total market)
  1. Toyota Yaris
  2. Toyota Hilux
  3. Kia Rio
  4. Hyundai Accent
  5. Kia Picanto

Source: AAP (est. 2015)

Chapter 3: Company car market

Total Fleet Park (company cars)/Fleet penetration in total fleet sales

553,000 vehicles (approximately 20% of the country's total car park)

  • Of this amount, about 12,200 vehicles (2% of the corporate car park) entail operational leasing contracts.
  • Most of the country's company cars are for utility purposes, as opposed to benefit cars for executives.  

Source: Arval-Relsa

Top 5 fleet brands (fleet market)

National statistics are yet to be acquired.

However, for multinational vehicle leasing group Arval-Relsa
1. Toyota
2. Nissan 
3. Renault

Fleet Model preference top 5 (fleet market)

National statistics are yet to be acquired.

However, for multinational vehicle leasing group Arval-Relsa, the most requested models are the Toyota Hilux pickup, Mitsubishi L200 pickup, and Chevrolet N300 van.

Chapter 4: Taxation & legislation

Perú

The basis of Company Car taxation in Perú is reflected in this overview. Different types of taxes are considered here: taxes related to the registration of the vehicle, income taxes and VAT aspects. Expected future developments are also briefly listed, if any.

  1. Car taxation: Vehicle property tax
  • Taxable event

VEHICLES OWNERSHIP.

Vehicles: cars, vans, station wagons, trucks and buses not older than three years (Period counted from the first registration in the Vehicle Property Registry)

  • Taxable person

OWNER (individual or entity) on 1 January of every taxable year

  • Tax due

1% x the Vehicle’s original purchase value, import value or value registered on books

  • Taxable period

Annual

  1. Income tax
  • Income tax for car industry

Taxable Income x 29.5%

  • Deduction of car expenses (rental, leasing, leasing, fuel, lubricants, maintenance, insurance, repair, amortization, etc.)

Permitted when they are used in permanent way for the development of the business.

  • Accelerated asset amortization – Cars acquired by Leasing

Accelerated amortization on the leasing contract period, under special requisites.

  1. VAT
  • VAT applicable

(Car import/ car sale/car lease value) x 18%

  • Deduction

VAT payable = Output VAT – Input VAT

Enterprises recognized as general taxpayers are entitled to use the input tax to credit against the output tax.

Output VAT = sales value*applicable tax rate

Input VAT = purchase value*applicable tax rate

  • Leasing

Taxable as financial service: Leasing interests x 18%

  1. Excise tax
  • Excise tax applicable

Vehicles import/ vehicles sale (by importer), included in the following NANDINA Tariff item numbers:

8703.10.00.00
8703.31.10.00/ 8703.90.00.90

8704.21.10.10- 8704.31.10.10

8704.21.10.90- 8704.21.90.00

8704.31.10.90- 8704.31.90.00

Import: value+duty X 10%

Car sale: value x 10%

8701.20.00.00

8702.10.10.00/ 8702.90.99.90

8703.10.00.00/ 8703.90.00.90

8706.00.10.00/ 8706.00.90.00

8704.21.00.10/ 8704.90.00.00

8707.10.00.00/ 8707.90.90.00

Import: value+duty X 30%

Car sale: value x 30%

 

  1. Company Car
  • VAT Due on private use of company cars

N/A

  • Company car

Limited deduction for cars of categories A2, A3, A4, B1.3 and B1.4, assigned to use on Management, Direction, Representation or administration activities:

- Limited number of vehicles depending on annual income.

- Non permitted deduction when vehicle purchase value is over 30 Tax Units (2018 Tax Unit = PEN 4150)

Company car provided for private use of employee is taxable for employee, as part of work income.

  1. Income Taxes – drivers’ personal taxation
  • Private car in the personal tax return

- Expenses deductible by driver if he assumes the expenses, and driver’s income qualifies as business income.

- Expenses not deductible on driver´s personal tax return if cost are assumed directly by Company. Duly supported, deduction is allowed to the Company (with limits settled on point 5).

  1. Import duties

Vehicles subject to duties

Included on NANDINA tariff item Code 87.03 “Passenger cars and other motor vehicles principally designed for the transport of persons (other than those of heading 8702), including station wagons ( "break" or "station wagon") and racing”

Tax application

CIF x 6%


Source: BDO (2018)

Meanwhile, owing to a 10% increase of the ISC selective tax on consumption determined by the ministry of economy and finance, the price of new passenger vehicles operating on gasoline in Peru is seen increasing some 12% on into the second semester of 2018, something that will affect upcoming fleet renewal decisions. Source: Peru's automotive association AAP.

Chapter 5: Car policies

Corporate cars in Peru pertain more to vehicles used for utility purposes as opposed to benefit cars for company executives.

Utility vehicles, or those used to support company operations, commonly involve pickups and vans. They are mostly used by on-site workers, technicians, construction supervisors, among others.

Benefit vehicles such as sedans, hatchbacks, and SUVs are mainly used by salespeople, managers, directors, and other executives. Usually, the higher the job position, the more exclusive the vehicle is. 

Sometimes, the vehicle could be used for personal use but it really depends on the policy of each client. To monitor whether the driver is using the vehicle for business or personal use, tools such as GPS can be used. To better manage fleets, it is ideal for leasing companies to have a central communication center which directs phone calls to the appropriate department needed.   

For Arval-Resla

  • Traffic accidents are handled directly with insurance companies
  • In the case of vehicle maintenance or if the car breaks down, customers contact the central office to request service.
  • Traffic ticket fines, however, are managed internally. Once recieved, customers are informed. 

Chapter 6: Funding methods

2017

Approximately 30% of car sales were accomplished through vehicle credit, meaning special financing for cars. Buyers should first consult the annual effective cost rate TCEA being offered from the various creditors. Other options are personal loans or leasing.  

2018

As of the second semester of 2018, around half of the cars in Peru are bought in cash and only 20% are acquired through car loans from banks. According to BCP who leads vehicle financing with a 28% share of the market, this is an opportunity for the bank which is expecting its vehicle loans to be up by 8% in 2018. To help achieve this, the bank is offering Compra Inteligente BCP (intelligent purchase BCP) which offers 45% lower financing rates than a conventional credit line.


 

Chapter 7: Fuel

Average gasoline price per liter: US$1.09 
World average: US$1.17
(est. August 1, 2018) 

  • Gasoline in Peru is mixed with up to 7.8% ethanol.
  • Pushing for the import of cars using natural gas by reducing ISC tax to 10% from 30%.
  • To push for the reduction of gasoline vehicles, there is 0% ISC tax on electric vehicles.
     

 

Chapter 8 : TCO components

Traveling by personal car to and from work in Lima costs an average of 238 Peruvian sols (US$73) per week, while using other means of transport cost 40 sols on average, nearly five times less. The former (private car) includes the cost of maintenance, insurance, fuel, parking, etc. 

Traffic is one of the reasons why traveling in your own car can get expensive. Besides fuel consumption increasing every time you sit in a traffic jam, road congestion increases wear and tear on vehicle parts. This, in turn, results in more maintenance and a shorter life for your vehicle.

Average weekly public transportation cost in Lima
minibus: 30 sols
bus: 39 sols
motorcyle: 55 sols
taxi: 57 sols
mototaxi: 66 sols


Source: Study carried out by the Pacifico University graduate school and consultancy firm Marketwin called "Tráfico y Tendencias de la Movilidad Urbana en los Limeños" (Traffic and tendencies of Urban Mobility in Lima). 

 

Chapter 9: Safety, insurance and telematics

Safety

Safety regulation is not very strict in Peru. According to the transport and communication ministry, among the features needed on cars are very basic (e.g. bumpers, windows, and brakes). 

Insurance

Approximatly 23% of the cars in Peru have insured, and about 70% of drivers have the SOAT obligatory insurance for bodily injury

SOAT covers all persons who are victims of a traffic accident (driver, vehicle occupants and pedestrians). It is very complete as there is no limit as to the number of victims in an accident. However, there are various types of vehicle insurance. While getting protection which includes bodily injury, collission, and theft can give you peace of mind, opening up a policy for only bodily injury and protetion only in the case of a total loss could pose some high risks. 

Telematics

All vehicles in Peru in the road transport and distribution industry are required by law to report their GPS location to the SUTRAN monitoring and management center. The law is mostly aimed at preventing heavy vehicles from exceeding national speed limits and helping to reduce the high incidents of road accidents in Peru. 

Companies that provide fleet control software are required to transmit the following vehicle data to SUTRAN.

  • Vehicle Registration
  • Routes Traveled
  • Speed
  • Geolocation (Latitude and Longitude)  

Approximately 82% of Peruvians drive their vehicles below the minimum standard of what is considered to be good driving, according to a study called "Driving Style" carried out by road safety company Tracklink. 

This minimum standard of good driving considers having a 9% frequency of accidents, which is the maximum percentage "acceptable" in the European Union. In the case of Peru, this number is above 40%. Moreover, on a 0-100 scale with 100 being best, 82% of drivers in Peru failed to reach the 55-point minimum considered to be acceptable driving.  The average score in Peru was 38.3.

 

 

Chapter 10: Environment

Since April 2018, Peru's environment ministry has set a Euro IV standard for imported vehicles, meaning that they must have modern emission control systems which reduce the emission of harmful gases into the atmosphere. 
 
Moreover, to jump start hybrid and electric vehicle (EV) sales in 2019, the ministry of energy and mining will award bonuses to individuals or companies acquiring these types of vehicles. The ministry of economy and finance has also passed a decree which eliminates the ISC excise tax for those renewing their car parks with hybrids or EVs.
 
According to local reports, about 90% of Peruvians are interested in buying these types of cars.

However, neither the commercial offer of EVs nor the necessary infrastructure for these type of vehicles are sufficient enough to really take advantage of tax breaks. It should still be a few years until automakers really start brining EVs into the market. Initially, they will be focusoing on the luxury market, corporate cars, and passenger transport.

In the meantime, companies linked to the local energy sector are seeking long-term regularory changes and public-private partnerships aimed at harmonizing the basic fundamentals of the industry, including aspects such as developing a standard connection for vehicles wanting to recharge on the electricity grid

 
 

Chapter 11: Mobility

Peru loses 5.5% of GDP due to mobility problems: 1.5% in accidents, 1.5% in health, 1.5% in lost time and 1% on fuel.

  • In Lima, about 16% of its residents use their own cars to get to and from work.
  • Approximately 57% of residents in Lima spend more than two hours a day traveling back and forth to work.
  • As such, 8% of the residents in the city have moved closer to their work or place of study to reduce the time and cost of commuting.

To resolve traffic congestion, one thing Peru is trying to do is stimulate is the usage of bike sharing systems, something that is lacking in the country.

In February 2017, the Urgente Pedal (Urgent Pedal) pact was signed in Lima, a commitment to contribute to sustainable mobility by promoting the use of bycles for workers, customers and suppliers. Within one week after the launch of the proposal, nine entities and business groups signed the pact.

However, according to to a study on traffic in the metropolitan region of Lima carried out by consultancy company Marketwin in September 2017, only 2% of the population in the city would be wiling to replace their car with a bicycle or non-motorized vehicle.

 

 

Chapter 12: Key trends to watch