Car prices escalate as import halts
- By Dulguun Bayarsaikhan -
- Jul 09,2021
Tavan Bogd Group and Munkhkhada LLC, Mongolia’s authorized distributors of Toyota Corporation, are planning to import 200 and 120 new models of Land Cruiser respectively in August.
The new Land Cruiser 300 Series reportedly costs between 188.1 million MNT and 295 million USD depending on features. Tavan Bogd’s pre-order sold out in just two hours. This came as a shock to most Mongolians who are facing economic strains and unable to find affordable cars.
Local car prices have risen by up to 20 percent this year, according to car dealers. Mongolia mostly imports vehicles that have been used for around a decade before getting shipped. Yet, the prices are picking up, even the prices of old cars that were used in Mongolia.
“Prices of old cars slightly rose after prices of ‘imported’ cars jumped. On average, the prices of cars that were previously driven in Mongolia is now 5 to 10 percent higher,” said P.Erdenebaatar, a car dealer in Da Khuree Auto Market.
Mongolians prefer vehicles from Japan as they seem to better handle Mongolia’s road conditions and be more durable compared to cars made in other countries. Some reports indicate that Japanese-made cars account for approximately 90 percent of all cars in Mongolia. As Mongolia’s excise duty on motor vehicles is stable, car prices were heavily dependent on the exchange rate of the tugrug to yen. At present, a yen is equivalent to 25.7 MNT, with tugrug depreciating by 0.5 MNT against yen since last year. Hence, the current spike in car prices isn’t due to stronger yen value against the tugrug but resulting from the COVID-19 induced disruptions of supplies.
Car dealers said that they procure used cars from Japan at auctions but since the onset of the pandemic, the Japanese side has been holding auctions less frequently. Japan seems be cutting down its expenses as well. As fewer auctions are held, the bids are getting higher. Moreover, Russia has permitted right-hand-drive cars, turning it into a new competitor for Japanese car purchase. Mongolian car dealers said that the large economy is not thrifty when it comes to bids.
The other reason for the price surge is connected to logistical issues. As previously reported, over 5,000 containers heading to Mongolia are stuck at China’s Tianjin port. Some of these containers are carrying cars and the swelling transport costs are driving up car prices, as explained by dealers. It appears that Da Khuree and 22th Auto Complex have sold out most of their cars and decided to raise prices of the few remaining ones. Other smaller auto markets have followed suit and tweaked their prices.
The National Statistics Office’s reports reveal that Mongolia imported products and goods worth 585.5 million USD in 2019, which declined to 406.7 million USD in 2020. Vehicles account for approximately 70 percent of total imports from Japan. In other words, Mongolia bought fewer cars from Japan after the outbreak of the global pandemic.
Here’s a clear example of the price spike. A Land Cruiser 200 Series, produced in 2016, now costs 110 million to 170 million MNT depending on features. This is 20 million MNT higher compared to the price range of 90 million to 150 million MNT in 2020. The price of Prado 120 Series now stands at 52 million to 55 million MNT, up from 42 million to 45 million MNT price tag of last year. On the other hand, Toyota Harrier Series is available on the market for 37 million MNT at highest, showing 5 million MNT rise. The most popular Prius 30 and Prius 20 cost 21 million MNT and 16.5 million MNT (top prices), going up by almost 3 million MNT compared to the previous year.
When asked if car prices would deflate, car dealer D.Munkhbat responded, “Cars might become cheaper if more cargo is allowed to pass through the border. It’ll dependent on how the pandemic plays out. Car prices could perhaps decrease by October.”