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Impact of Grey Imports on Brand New Car Dealers: The Case of Malawi and Botswana
Rapid change in technology causes frequent improvements in durable goods like cars. Planned obsolescence and strict legislation make most car owners in rich countries like Japan to dispose off their cars and get new ones. This has led to growth of the market of gray imports in many Third World countries like Malawi and Botswana because the main consideration in purchasing a car by average income earners is affordability.
The purpose of this paper was to find out if the increase in gray imports market has affected the brand new car dealers negatively by being substitute products to brand new cars. The study sought to answer the following questions. It sought to answer the following questions,
a) What is the impact of grey imports on brand new car dealers’ sales in Malawi and Botswana?, and
b) If the impact is negative, what strategies are they using in reaction to that impact?
The market for brand new cars is mainly fueled by bank loans, government loans and the government is the main customer (in Malawi and Botswana). OEM and OCM have great influence in South Africa that treacles down and affects the market of gray imports. Gray imports did not have a huge negative impact on brand new cars.
Gray imports affected sales of volume brands because gray imports have positive cross elasticity of demand and are therefore substitutes to low-level volume brands. Economy and premium brands have hardly been affected. Dealerships that have been affected mainly engage in strenuous marketing of back-up services to convince people to buy entry level (volume brand) brand new cars than going for gray imports that do not have back-up service and warranties.
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