Automotive -- Experience Nicaragua

The market for automotive parts has been growing since the end of the Sandinista regime and will continue along with the expanding economy. The market has grown at about 20% annually over the last three years. Asian producers hold the largest share of the market in Nicaragua due to the US embargo during the Sandinista years. US producers hold about one third of the market. European producers hold only a very small portion of the market. The legal market is estimated at about 4.4 million dollars and the black market brings the total to about 6.1 million.

Market Share of Automotive Market
Country	1994	1995	1996
Japan	54.6	32.0	33.2
United States	23.1	36.7	32.8
Russia	4.3	1.7	3.1
Panama	5.8	6.3	8.0
Taiwan	1.2	1.7	1.3
Korea	.6	.8	.6
Others	11.0	20.7	21.5
Source: US Embassy Industry Sector Analysis

The black market is centered in a large outdoor market in the center of Managua called El Mercado Oriental. As trucks and SUVs make up the bulk of the market, there is a high demand for spare truck parts and local road conditions create a need for frequent repairs.

The two, virtually the only, factors which determine what is purchased are availability and price. Name preference will always fall away if another product is cheaper and quality also plays second to price and availability (black market products often have the same name as legitimate products, thus eliminating name preference). Among the more wealthy, quality and brand preference do become more of a factor, however. The black market supplies approximately 40% of the country's demand for automotive parts. Nicaragua's small industrial sector produces absolutely nothing so all materials are imported.

Retail markets and direct marketing are not an option in Nicaragua, so producers must market their products through a local agent or distributor (there are no true large department stores in Nicaragua). Duties on these imported products are rather high (they can reach almost 50%) so retail prices are consequently rather exorbitant and demand for new vehicles has been suppressed. Import taxes on new cars are now being calculated by using the NADA "Blue Book" whereas they were previously taxed based on individual customs offical's decisions.