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Secondhand Vehicles in Developing Countries

Imported secondhand vehicles are invading developing countries like Mexico. Photo by EMBARQ.

A version of this post was originally published in Portuguese on TheCityFix Brasil on July 29, 2011. 

Imported secondhand vehicles (ISV) are being shipped around the world from Belgium to Benin, from the United States to the Ukraine. From 1997 to 2007 the amount of secondhand vehicles sold worldwide grew from 1,243,140 to 4,778,657 vehicles, an increase of 284 percent, according to new research from the Center for Sustainable Transport in Mexcio (CTS-México), a member of the EMBARQ global network (the producer of this blog.) The worldwide gross sales of secondhand vehicles is approximately $9 billion per year. These vehicles represent a growing percentage of the fleet of many developing countries, despite the fact that they lead to deadly road accidents, are less fuel-efficient and contribute to poor air quality.

As industrialized nations enforce tighter environmental and mechanical regulations on vehicles, citizens are forced to stop driving their older cars and trucks. As a result, eager clients from the developing world have been snatching these secondhand vehicles off the shelves. “It’s very cheap to import vehicles and there’s already an industry evolving all the way from Asia because their prices are attractive,”  explains Jorge Macias, an environmental economics and climate change specialist at CTS-México. “I think this globalized world is favoring this market.”

Peru’s government has recently debated the issue of importing used vehicles. “Peru is a modern country with incredible economic growth and not a junk yard,” Peru’s environment minister Antonio Brack Egg said to the local press. “For many years we have imported used cars, changing steering wheels from one side to the other, falsifying the age of used cars. We need a modern automotive fleet.”

There are currently more than 500,000 vehicles over 15 years old on the streets of Peru. (EMBARQ helped the Municipality of Arequipa ban the use of shared taxicabs, known as lanchones, older than 25 years old, in an effort to reduce air pollution and modernize public transport in the historic city.) Importers and sellers are creative.

“You don’t even need to import the full vehicle,” CTS-México’s Macias said. “There are cases in Peru where they [just] import motors and they install the engine in a new chassis, and they sell them as new vehicles when they are actually old, very polluting vehicles.”

By far, the largest flow of used vehicles in the world is between the United States and Mexico, experts say. CTS-México, in collaboration with the Organisation for Economic Co-operation and Development (OECD), is currently producing a study, entitled the “Policy Handbook for Imported Secondhand Vehicles,” focusing on this trade.

“Mexico is the most representative case study because it shows the trend where other countries could follow, and that’s very worrisome,” Macias warns.

Beginning in 2005 Mexico began allowing the sale of secondhand vehicles following a trade agreement by then President Vicente Fox. Mexico’s car fleet is growing at an alarming rate, from 1997 to 2007, the amount of cars tripled from 8 million in 1996 to 24 million in 2006. In the U.S. a vehicle that doesn’t pass emissions testing cannot be driven and therefore has no value for the owner; that same automobile can be sold across the border in Mexico for a lucrative profit. A 2000 Ford Explorer in good condition with a Kelley Blue Book value of $1,750 can be sold in Mexico for $5,406, the study finds.

For lower income Mexicans, ISV represent an affordable substitute for inadequate public transportation. In Mexican cities’ peripheral suburbs, low-quality and informal microbuses, autobuses, vans and pickup trucks serve as the primary form of public transportation because no other competitive alternatives are available. New vehicles are out of the price range of lower income Mexicans. This means that secondhand vehicle sales have surged in recent years. The lowest-income Mexicans spend 60 percent of their transportation expenses on public transportation, compared to 12 percent for the highest-income Mexicans, according to the study. “ISV are in direct competition with public transportation,” Macias says. “The people that use public transportation are lower income people, and these are the same people who buy ISV.”

Because of rising gas prices, drivers in the U.S. have been trading in their gas guzzlers for more efficient hybrids and compact cars. The top 10 cars traded in the 2009 Car Allowance Rebate System, CARS, instituted by the American federal government, were identical to the top 10 ISV sold in Mexico from 2005-2008. Mexican drivers haven’t been affected by volatile oil prices due to a fuel subsidy provided by the federal government, therefore they aren’t hesitant to buy an inefficient vehicle.

According to Macias:

“Every vehicle that enters Mexico represents an increase in the subsidy, which represents 50 percent of the country’s expenses in education. If you have a Hummer and you use it normally, you get a $180 monthly subsidy. Compared to the oportunidades poverty relief program, a family of four would get $50 dollars a month. It makes the case for how inequitable the subsidy policy is. Our policies are [undermining] sustainable transport; you are subsidizing a highly motorizing and highly polluting country.”

The OECD has calculated the Oil Stabilization Fund accounts for more than two times the amount spent on anti-poverty campaigns and 1.4 times the health budget.

The differences in emissions from ISV compared to a new vehicle are considerably higher across the board. Take, for instance, the emissions from a 2000 Ford Explorer compared to a 2010 Explorer: In grams per kilometer, a 2000 Ford Explorer emits 94 percent more nitrogen oxide, 62 percent more carbon dioxide, and 83 percent more smog-forming pollution (in tons per 15,000 miles per year.) Most alarmingly, fuel-inefficient SUVs, vans and light trucks comprised 69 percent of the ISV fleet sold in 2008, compared to 31 percent for compact cars. The new vehicle fleet, of which 65 percent are compact cars, are expected to have an average fuel efficiency of 16 kilometers per liter by 2024, compared to 7 kilometers per liter for ISV, according to CTS-México’s study.

CTS-México believes its policy recommendations will serve as a valuable guide to other countries. It recommends that Mexico should require the inspection and maintenance of vehicles, much like the Mexican capital has done. Mexico City now boasts the cleanest, newest fleet in the country, cutting emissions in half since 1994 despite the fact their vehicle fleet has doubled.

The government needs to require higher standards for imported vehicles because many of these vehicles would have been scrapped in their country of origin if they were not allowed to be imported in the demanding country. Mexico should implement a compulsory insurance program, which currently doesn’t exist. Mandatory car insurance payments would deter drivers from purchasing a cheap secondhand vehicle. Lastly government scrappage programs like CARS, which require traded-in vehicles to be destroyed to prevent resale, are beneficial to the removal of older automobile fleets. (Although, there are many reasons why a “cash for clunkers” program should not be considered a silver bullet solution.) Macias said he hopes CTS-México’s study will help curb the flow of dangerous, polluting, fuel-inefficient vehicles into industrializing countries.

Over the past four years, much media attention has been given to the gruesome drug war that has erupted in Mexico and the 34,600 deaths resulting from cartel violence. However, over the same time period 68,000 lives have been lost to road traffic crashes. There is a tacit acceptance of traffic crashes, despite their devastation. As the world continues the pattern of motorization, road traffic deaths are expected to rise 65 percent between 2000 and 2020. There are currently 1.3 million deaths per year from road deaths. As secondhand vehicles pour into developing countries, citizens, especially the young and impoverished, will become even more vulnerable to road deaths and injuries.

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  • Schmid_georg

    excellent article with a lot of information!