Why are cars so expensive in Argentina?

Visiting car dealerships in Mexico one could find cars as cheap as $5,000 dollars, in Chile the cheapest cars could run you for some $8,000, and in Brazil for almost $10,000. In Argentina, however, prices for the cheapest cars in the market won’t fall under $12,000.

The main cause for this significant gap in price is taxation, very heavy taxation. Ruben Beato, secretary general of Argentina’s Car Dealership Association assures that around 48% of a car’s final price corresponds to taxes. This even applies to cars imported from Brazil, that enjoy tax exemptions due to bilateral agreements between the two countries in Mercosur.

The price for a car imported into Argentina from a country outside Mercosur is much higher, since it comes with an additional 35% tax.

It seems, then, that Mercosur’s protectionists policies are at least part of the reason behind the abnormally high price of cars in Argentina.

They have reason to be protective, as Argentina and Brazil both house sizeable automotive assembly plants.
Brazil assembles cars for both Volkswagen Group and Fiat Group, two of the largest manufacturers in the world as well as several others. Argentina hosts Fiat too, in addition to Renault, GM and a handful of others.

Gonzalo Dalmasso, consultant for the automotive sector from Argentinian consulting firm ABECEB is confident that “Without tariff protection we would not be able to manufacture cars.” He argues that these controls are necessary to remain competitive against manufacturers in Mexico and China, that due to lower salaries are able to provide considerably lower prices.

Additionally, Mauricio Macri’s first months in power carried a strong devaluation of the Argentinian Peso, which in turn spiked up the price of the US Dollar, and as a result, the price for new cars rose 41% during the last 12 months.

Oddly enough, prices for used cars are even higher than those of new cars. This phenomenon was brought around by the recent economic crisis in Brazil, which lowered its demand for cars and forced Argentinian manufacturers to look into their own internal market so fill in for their neighbor.

In order to make way in the local market, dealerships started posting discount after discount on the price of cars, hoping to outdo their rivals, this allowed some people to acquire a brand new car for less than what the same car costs in the used car classifieds.

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