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 News Around the Republic of Mexico | August 2005 
Tariffs Cut on Old Foreign Cars
 Adriana Arai - Bloomberg News
| | Hurricane Kenna flood waters covered cars in Puerto Vallarta in October 2003. |
Mexico City - Mexican President Vicente Fox slashed tariffs on 10- to 15-year-old cars from the United States and Canada, sparking concern among domestic carmakers and distributors that the imports will cut into sales of locally made autos.
Fox, in a decree published Monday, cut import duties on used cars to 10 percent from up to 50 percent, saying the imports would help make cars more affordable for more of the population. He also allowed Mexicans who own cars smuggled into the country to register and make them legal by paying the duty.
Unfair Competition?
The measure drew criticism from carmakers and dealerships, who said the lower tariff will create unfair competition for the local industry by encouraging imports of low-cost vehicles that in the United States were ready to be junked. Mexico's Association of Auto Dealerships cut its forecast for domestic sales of new vehicles this year to less than 1.1 million units from 1.2 million because of the measure, said Guillermo Rosales, an association director.
''This is clearly a political measure,'' said Cesar Flores, president of Mexico's Carmakers Association, which represents Volkswagen AG, Ford Motor Co. and General Motors Corp. in Mexico, among others. ''If we're going to import junk, we cannot compete,'' Flores said in a telephone interview from Mexico City.
Illegal Imports
About 800,000 passenger cars and light vehicles that are at least a decade old are brought illegally into Mexico from the United States each year, according to estimates by the carmakers and dealerships associations. They circulate without license plates, have no registration and don't go through pollution emission inspections, Rosales said.
Fox's decree today also reduces taxes on new cars that cost up to 190,000 pesos ($17,683) ''to allow those who own a used automobile in Mexico to replace it with a new one.'' He exempted new vehicles that cost up to 150,000 pesos from a new-vehicle tax and will halve such taxes on autos that cost between 150,001 pesos to 190,000 pesos, according to the decree.
The tax reduction and exemption will reduce the cost of such vehicles by 2 percent to 5 percent, Flores said. |
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