Mexico Clears Road for Used Cars

Wanted: millions of pre-owned vehicles. Inquire south of the border.

The Mexican government Monday cleared the way for older cars from the United States and Canada to be imported here, opening a potentially vast new market for U.S. vehicle merchants looking to unload old Detroit iron.

The move, part of an amnesty to register as many as 3 million scofflaws tooling around Mexico in illegally imported cars, could provide a boon to Mexican consumers who are expected to benefit from lower prices and a better selection.

It’s also a godsend for a U.S. market glutted with second-hand cars and trucks. Used-vehicle prices in the United States have slid in recent years because manufacturers keep offering fat incentives for Americans to buy new wheels, forcing sellers to swallow deep discounts even on vehicles a few years old.

Mexico’s decision could bring a crowd of new buyers for some of the dustiest inventory.

“When the Mexican public and Mexican dealers start coming up here to buy, it’s going to raise used-car prices dramatically,” said Louie Quezada, owner of Lotaner Motors in Costa Mesa and Stanton. “Even now, [Mexican] buyers pay my retail price on used trucks, take them down there and sell them for double.”

But not everyone in Mexico is happy about the prospect of a stampede of heavy metal from the United States.

Some new-car merchants are fuming over potential cut-rate competition that they say could harm Mexico’s domestic industry. They accuse Mexican President Vicente Fox of rewarding lawbreakers and caving in to pressure groups before next year’s presidential elections. Environmentalists say an influx of smoky clunkers would be a huge blow to Mexico, where big cities, particularly the capital, are beset with some of the foulest air in the world.

“It’s a real setback,” said Kate Blumberg, a research director at nonprofit International Council on Clean Transportation in Berkeley. “Mexico has been working really hard to improve its air quality. Now allowing a wave of used, dirty vehicles into the country just seems crazy to me.”

Before Fox’s executive decree Monday, Mexico had severely restricted the importation of used vehicles. But the new order now allows large-scale importing of some cars and trucks from the United States and Canada that are 10 to 15 years old. It also reduces taxes on some new Mexican-made vehicles to make them more affordable, and it allows drivers of vehicles smuggled illegally into the country to register them by paying taxes equivalent to 15% of the car’s value.

Industry experts estimate that 2 million to 3 million of these vehicles are currently driven on Mexican roads. Most lack proper tags and registration and don’t go through required emission inspections. Known here as “chocolates,” because, wags say, buyers never know what they’re getting until they try them, these vehicles have long been a source of debate.

Many Mexicans say the government forces them to pay inflated prices for vehicles through high taxes and other measures. Motorists have smuggled millions of vehicles from the United States, and people who drive these cars are in constant danger of being ticketed or having their vehicles seized by authorities.

Activist groups, particularly those representing farmers, say these low-cost vehicles are crucial to their livelihoods. They have pressured the government to legalize them, staging massive protests and blocking traffic with the outlawed vehicles in the capital.

Those efforts appeared to pay off Monday when the government granted the second mass amnesty in five years.

“Our struggle has been worth it,” said Jose Guadalupe Gundino Moranchel, secretary general with a union of farm workers.

But critics said Monday’s action amounted to a capitulation by Fox to pressure groups from Mexico’s rural areas, which have traditionally cast their lot with the rival Institutional Revolutionary Party, or PRI.

Fox, a member of the conservative National Action Party, is prohibited from running for a second term. Polls show the presidential race shaping up to be a tossup between candidates from the three major parties, all of whom want to appear sympathetic to the plight of the rural poor.

“It’s pure politics,” said Oscar Tame Yapur, whose family owns a Ford dealership in the capital. “This is horrible for the domestic industry. This country is going to be filled with U.S. junk.”

Mexican used-car dealers were divided on how they would be affected by Monday’s decree. Some welcomed the chance to carry a wider variety of U.S. cars at lower prices. But others were fearful that customers, particularly those in northern Mexico, would skip local dealers and shop for their vehicles across the border.

Claudia Guaida, a saleswoman at Autos Guaida, a used-car lot in Mexico City, said some people would bring back small fleets to sell on the streets in direct competition with established dealers.

Environmentalists also are concerned. Mexican officials say the imported older vehicles will have to meet Mexican air-quality standards for their particular model year. Still, pre-1995 vehicles emit twice the pollutants permitted for new cars in Mexico, according to Blumberg of the International Council on Clean Transportation.

The export of high-polluting used cars to developing nations “is a huge problem around the world,” Blumberg said. “We’re seeing the same thing in Asia.”

North American Free Trade Agreement rules require Mexico to begin opening its market to used automobiles from the U.S. and Canada by 2009, so Monday’s decree accelerated that action. The U.S. is home to nearly 100 million vehicles at least 10 years old and could provide a huge pool of imports into Mexico, according to Adesa Inc., an Indiana-based operator of used-car auctions.

Opening the Mexico market will benefit merchants and consumers there and in the United States, said Timothy Van Dam, general manager of California Auto Dealers Exchange in Anaheim, the largest dealer auction on the West Coast.

“Many cars are considered disposable even though they still have a lot of miles left,” he said. “Cars are built much better, last longer, and there are a lot more of them, so that a car that used to sell for $5,000 now sells for $2,500.”

At the lowest rung of the car market, Van Dam said, a so-called junk car fetched $200 at wholesale auction five or six years ago. “Now, I have to pay someone to haul it away.” But a nation of Mexican buyers, he said, would give new life to the used-car market.

Car dealer Quezada, who has sold used cars in Los Angeles and Orange counties for 35 years, said older pickup trucks are so hot among his Spanish-speaking customers that “they’re hard to find around here.”

When the Mexican government gave amnesty to the Mexican owners of U.S. vehicles five years ago, Quezada said, demand at his two Orange County car lots went through the roof.

“I had 26 trucks and people were calling from as far away as Mexico City and Guadalajara,” he said.

There have been fewer restrictions on U.S. cars sold for use in Mexico’s border cities, he said: “I have people here every day from Tijuana, Tecate, Mexicali, Ensenada.”

As Quezada spoke on the phone from his Stanton lot, he asked a customer in Spanish whether he’d heard the news.

“Yes,” the man replied. “We can buy all the cars now.”

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Times researcher Cecilia Sanchez in Mexico City contributed to this report.

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Driving south

Used-car exports from the United States to Mexico soared last year.

Number of used cars exported each year

(In thousands)

‘00: 25.3

‘01: 38.5

‘02: 48.3

‘03: 49.3

‘04: 80

Source: U.S. Census Bureau