BEIRUT: Car dealers in Lebanon are paying a hefty and unparalleled price due to the severe economic recession, sharp devaluation of Lebanese pound and total political paralysis.

This gloomy picture was based on figures released by the Association of Automobile Importers (AIA) in Lebanon which indicated that dealers sold 62 new passenger cars in the first two months of 2021, constituting a drop of 96.7 percent from 1,876 cars sold in the same period of 2020.

According to some of the car dealers interviewed by The Daily Star, most consumers who used to renew their vehicles every few years, have abandoned this habit and focused more on essential items such as food and fuel oil.

Naturally our car business was hit hard by the situation in the country. Our sales have plummeted in a sharp way and we hardly sell any new car in weeks. Our car import has also dropped since most of our regular customers now view them as a luxury item nowadays, one car dealer said, who spoke on condition of anonymity.

But contrary to the general belief, most if not all new car dealers are not offering big discounts to any customer who is willing to pay for his vehicle in fresh dollars.

The payment of the new car is divided as follows: 60 percent in dollars cash, 30 percent in Lebanese pounds on the official rate (LL1,507 to the dollar) and the remaining 10 percent in check lollar (LL3,900), one car dealer explained.

He added that the 60 percent covers the cost of the factory, 30 percent covers the Customs and VAT paid to the Lebanese state at the official rate and the remaining is in check lollar to close the price of the car.

Mercedes, Nissan, Toyota and all the different car brands are following the same principles. We cant accept full cash payment in dollar banknotes because part of this payment must be done in Lebanese pounds. A customer who is eager to pay in dollars cash for the car can go to any exchange dealer to convert some of the dollars to Lebanese pounds, another car dealer said.

Car dealers assured that they are not involved in exchanging the currency for their customers.

The car dealers added that if a customer ordered a new model of car which is not available in the showroom then he can put an advance payment on this car and the dealer will ship it to him to Lebanon.

Individuals and institutional clients purchased 61 new cars in January and only one new vehicle in February 2020, compared to 979 new automobiles in January and 897 new cars in February 2020. The number of new cars sold in February 2021 reached its lowest level on record.

The AIA indicated that the massive drop in February 2021 came as a result of the closure of companies and of car registration centers due to the lockdown measures imposed by the government, in addition to the dramatic fluctuations of the exchange rate on the parallel market.

Also, dealers sold 6,152 new passenger cars in 2020, 21,991 automobiles in 2019 and 33,012 new cars in 2018.

The market for new passenger cars in Lebanon has been facing increasing challenges in the past few years, including the contraction in economic activity, job insecurity and, more recently, the shortage of foreign currency liquidity in the local market, the emergence of a parallel exchange rate market, as well as the reduced purchasing power of consumers and a very low level of household confidence, the association said.

The AIA indicated that car dealers incurred damages in the tens of millions of dollars as a result of the explosion of the Beirut Port on Aug. 4, 2020, as well as the national lockdown measures that the government imposed to contain the spread of the coronavirus.

It considered that a number of car dealerships could close down and lay off a large number of their employees, and that car sales could further deteriorate in the coming months. Also, it estimated that tax payments by car dealers to the Treasury regressed from $265 million in 2018 to less than $33 million in 2020, constituting a decline of 87.5 percent.

The AIA stopped releasing its monthly data on car sales by brand, distributor and source country since January 2020.

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