Auto Industry in Yemen in Need of a Jump Start

National Yemen

Toyota Showroom Sana'a

The automobile industry, a bellweather for the heath of Yemen’s economy is struggling. Hard hit by the economic and political crisis that has wreaked havoc in Yemen during the past nine months, the car industry is sputtering towards a complete breakdown. Almost a year has gone by without one car agent announcing the arrival of any 2011 models. Even agents of premium brands face almost zero sales and rarely see customers in their show room.

Sales managers are complaining due to the complete paralysis that has infected their businesses since the start of the revolution movement.

Last March, most of the local agents in Haddah Street and other areas cleared their showrooms in fear of the looting that many expected would quickly ensue. Unfortunately, the cars have yet to return.

The crisis in car sales has not only affected the premium brand sellers, but other businessmen as well including second-hand dealers. Many businesses selling second-hand shops noted that they were not able to sell any average priced cars, or even the economy priced cars that sell for as low as $2500.

“The anxiety is growing that the crisis will continue until the first quart of next year,” said a sales person at one famous car dealer.

The salesmen said that they imported the models of 2011 and that they still had a few cars from last year’s model. However, like many businesses, he is not in a rush to import next year’s model but he may not have a choice.

“We should still import models for next year because if we don’t, our brand will lose its status.”

The salesmen noted that the company is still paying salaries but does not know if they will continue to do so.

“We are planning to stay open and continue our work, but our showrooms never receive calls from customers, or even the people who used to call just for inquiries,” said the salesmen. The salesman has many friends who have already lost their jobs at their business due to lack of sales.

In a recent survey of the total loss in sales comparing the sales from this year to last year, the difference was a startling 94% decrease.

The lack of sales isn’t the only problem. With less sales and less people driving, it has resulting in a significant drop in orders for spare parts – another significant revenue stream for many of the struggling automobiles.

Many car sellers worry about the status of the economy, but many admit the future looks bleak. On a macro-economic scale, the Yemen economy has been hampered heavily by a postponement, if not outright cancellation, of much needed foreign investment. Many projects were suspended on the onset of the Yemen revolution.

This situation has spooked the banks, too. Accordingly, the banks have stopped many of their finance and installment programs for potential car buyers, cutting into an even smaller pool of potential car owners.

With fewer sales, many car sellers find themselves trapped. While they want to lower the price of their cars, the price to import them only goes up as the Yemeni Rial has drastically depreciated against the dollar. Where 200YR could buy 1$ US, it now takes 240YR pushing car prices up nearly 25%.

The Chamber of Commerce in Sana’a recently warned that the declining security in Yemen heavily affects depresses economic activity pulling down the standard of living for Yemeni citizens. Without a clear future and path to peace, the amount of cars that are sold will only decrease – putting even more people out of work.