Business News of 2014-06-28

Fuel cost hurts garage owners

Garage owners are bitter about the current poor sales of automobiles, particularly sports utility vehicles (SUVS), as a hike in fuel cost has pushed consumers to cut down on fuel consumption.

According to some of the garage operators, car sales have dropped by about two-thirds since the year began -- dampening the mood in the car sales industry.

Esther Attamah, the Sales Executive of Europa Motors said: “We used to import 20 to 30 cars in a month, but now we import about ten cars in a month. And we used to sell about five to six cars in a week, but now we sell two to three cars in a week”.

Since the year began, prices of petroleum products have been adjusted upwards by three times, which sums up to about 16 percent as a result of the slide in the currency -- which seems relentless despite the strong intervention by the central bank in February.

B&FT understands that from next week, July 1, fuel prices will go up by about 20% to enable oil distribution and marketing companies to recover the cost in procuring crude oil into the country, as the fall in the value of the cedi against the US dollar has increased crude oil import cost.

Enquiries at a dozen top garages reveal that most automobile dealers have cut down on their SUV imports as a result of low demand for the vehicles.

They contend consumer interest in vehicles has shifted to saloon cars, most of which have a reputation for consuming less fuel.

A sales executive of De-Georgia Motors who wanted to remain annonymous explained that the incessant increase in fuel prices has greatly affected the car dealership business, especially the SUVs.

“Most people know four-by-four cars consume a lot of fuel because of their 3.4, 4.0 and 4.5 horsepower engines. With regard to this at this time, no one will go in for a SUV whereas a saloon car with smaller engine capacity can save them money on fuel.

“Now we are not selling the SUVs at all. It is only when someone wants to rent the car for an occasion -- that is, when they come in for them. What has kept the company running till now is the rental service which helps heat the engines of these SUVs; if not so, by now all the cars would have broken down,” she said.

Donald Opoku of K&K Motors added: “The fuel capacity of saloon cars range from1.8, 2.0, 2.4 and cannot go beyond. Because of the fuel consumption of these four-by-four cars, some garages dealing in four-wheel drives hardly make sales. The cars usually take close to seven months before they get buyers.”

The shift from high consuming vehicles to low ones is news that is expected to excite government officials, following several attempts to reduce the country’s fuel import bills.

Nonetheless, the odds are against car dealers --who are already struggling to make sales due to shift in consumer preference, volatile exchange rate regime and increased import charges.

Over the past 10 years the business of selling cars has benefitted from Ghana’s sturdy growth, which has produced new members of the middle-class aspiring to tastier things including a car and their own house.

According to figures from the Driver and Vehicle Licencing Authority, the number of vehicles registered each year doubled from 2000-2010, a decade in which the economy expanded at 6 percent per annum.

Source: B&FT
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