Agreement with the EU increased sales of European vehicles by 507% in six years What will happen in 2024 with zero customs?

It was April 2017, the trade deal with the European Union (EU) had just entered its fourth month since it came into effect on January 1 of that year, but anticipation was already felt in one sector: the automotive sector, with the promise of cheaper European cars for Ecuador due to the reduction of tariffs. But it was not an immediate benefit, the customs duty, which was then 40% for vehicles assembled in Europe, would fall by 5% per year and we would have to wait seven years for it to fall to zero. It seemed far away, in the meantime brands were making their projections, preparing fairs, risky business plans and strategies for winning market share.

Did they achieve it? After 84 months, the import duty on European vehicles will reach zero on January 1, 2024, and brands such as Italy’s Fiat, France’s Citroen, Germany’s Audi, Mercedes Benz and BMW, among others, are already announcing their plans to import European vehicles. companies that will welcome the first year with 100% of this advantage. Meanwhile, looking back, for Genaro Baldeón, executive president of the Association of Automobile Companies of Ecuador (Aeade), the agreement was a success for the sector, noting that sales of vehicles of European origin increased by 507% between 2016 and 2022, which shows the increase in car trade due to the reduction in the prices of these products and the increase in their supply on the Ecuadorian market.

Vehicle sales fell 16% in November and recorded the first negative balance in 2023

Baldeón even emphasizes that the sales figures for vehicles of European origin, from January to November this year, reach a level similar to that observed during 2022, which allows them to assume a significant growth at the end of this year.

And this is shown by figures that support the growth of sales of these vehicles, which so far in 2023 represent 7.4% of total sales with a total of 9,133 units. While in 2017 they represented 4% with 4,219 units, at the end of 2016 they reached 2.4% with 1,519 units. Prices have risen from an average of $50,000 in 2016 to around $35,000 in 2023.

Along the way, brands employed risky strategies to maintain interest and increase sales as tariffs fell year after year. One of them was Peugeot, which, after negotiations with the factory, managed to reduce the duty by 35 percent on certain models between 2017 and 2018, which would last for seven years. This meant that the French brand, represented by Nexumcorp in Ecuador, which also distributes to Germany’s Opel, went from selling 350 units in 2017 to 1,300 in 2018, an increase of 200%.

Peugeot grew more than 200% in sales in Ecuador in 2018

Regarding this type of commercial strategy, Baldeón points out that there were brands that made a stronger price adjustment in the first years in line with the expectations of tariff reductions that they will have in the coming years, however, “it is not possible to make a tariff reduction from a company or a brand because they determined by the state based on their origin and each tariff subheading.”

Furthermore, the head of Aeada clarifies that when we talk about vehicles of European origin, it covers all those that are manufactured or assembled and comply with the rules of origin of the trade agreements that Ecuador has concluded with the EU and the United Kingdom – the latter the country left the EU through Breixt, but it retained the benefits it had under the agreement with Ecuador.

According to Baldeón, in 2016, 17 brands with models assembled in Europe were present on the Ecuadorian market; By 2023, that number has almost doubled, with 30 brands. This includes not only traditional German European brands, such as Audi, Mercedes Benz, BMW, Porsche, Volkswagen or Opel, French ones such as Peugeot or Citroen, Italian ones such as Fiat or Maserati, or English ones such as Land Rover or Jaguar , but also brands that have assembly plants in Europe, such as Nissan, Kia, Hyundai, Suzuki or Toyota.

More models from 2024

Jorge Flores, director of light vehicles at Mavesa, the company that distributes the French Citroen brand in Ecuador, recalls that in 2017 they had a 0.62% market share and will close in 2023 with 0.81%. “Although we are talking about growth compared to 2017, our best year was 2019, where we achieved a share of 1.48%. “We were hit hard by the pandemic and the lack of chips for the electrical components of our models.”

Executive projects predict that they will end 2023 with 1,030 units sold, and from 2017 to 2022 they sold 6,520.

Flores admits that before signing with the EU, brands of that origin had very high prices, which did not allow them to compete with traditional brands. The reduction in taxes allowed them to achieve very competitive prices and was reflected in the growth of sales starting in 2017. “An additional thing that has been done is to incorporate more elements such as comfort and safety of the vehicle year after year,” he emphasizes. .

The brand went from 5 models in 2017 to a portfolio of 8 models due to the incorporation of the SUV segment into the Ecuadorian market, and starting in 2024, according to Flores, its commercial segment will have a full portfolio, promoting important fleet business. “We strive to reach a minimum of 1,600 units by 2024. We have a competitive advantage in all segments, which will allow us to achieve this,” says the director of Mavesa.

Fiat brings 20 cars of its 500 Sport model to Ecuador in 2019

Meanwhile, Maresa – which represents Italy’s Fiat – also has plans for 2024. Jacqueline Flores, Fiat, Jeep and RAM Brand Manager, indicates that the only model of European origin is the F500. “This car is niche because of its characteristics, it was this year that there was a change in structure compared to the factory and it was not in the current portfolio,” says a spokesperson for the brand. Other Fiat models such as Argo Trekking, Pulse Drive and Fastback Audace are of Brazilian origin.

However, Flores predicts that “actually the future for Maresa is the exploitation of products of European origin.”