With a fleet of 50-year-old vehicles and growing U.S. public opinion to end its trade embargo, Cuba could someday be a big market for truck manufacturers.
Yet while there’s pent-up demand for newer American-made trucks, experts say the complexity of the country’s economy and its financial problems may make importing U.S. vehicles difficult.
There are thousands of antique cars and trucks on Cuba’s roads. Prior to Fidel Castro’s rise to power in 1959, the island nation had a love affair with American vehicles.
Until the revolution, Cuba was the top importer of U.S.-built vehicles, including Ford and General Motors trucks, said Tom Cotter, co-author of Cuba’s Car Culture: Celebrating the Island’s Automotive Love Affair.
After the revolution, Castro instituted a 200 percent tariff on all imported vehicles and President Eisenhower banned trade with the island in 1960. Castro then banned the import of all new American vehicles as well as replacement parts.
For more than five decades, Cuba has recycled and reused what it could, relying on a hodgepodge of parts passed down and rebuilt over the years. The whole country is a “junkyard of parts” where even screws are salvaged and parts are repaired, Cotter said.
A few classic American vehicles are equipped with parts from Danchuck, the world’s largest manufacturer of 1955 to 1957 Chevrolet restoration parts. But the only way to get those is to circumvent the U.S. embargo by shipping them to Mexico first then to Cuba, Cotter said.
“If you take a piece from your car you keep it forever because you can’t buy replacements,” Cotter said.
Many trucks have even been outfitted with engines from the tens of thousands of tractors that Belarus sent to the island over the past four decades, Cotter said.
Nevertheless, the U.S. has maintained a presence on Cuba’s roads. There are dozens of models of American-made cars and trucks from the 1950s, along with a mix of newer vehicles from other nations such as Russia and China – two of Cuba’s old communist trading partners.
Still half a century of repairing and rigging has left the country yearning for newer trucks, and with Florida only 90 miles away, the U.S. could be a big source of imports.
Cuba has a growing need for transportation to move agricultural products and to support the growing tourism industry, said Saul Berenthal, president of Cleber, a small tractor manufacturer in Paint Rock, Ala.
But all auto imports are tightly controlled even today. Only in the past couple of years have Cuban citizens been allowed to import vehicles on their own.
Last year Berenthal, who was born in Cuba, received noticed from the U.S. Treasury Department that his company would be the first manufacturer allowed to build product in Cuba since the embargo. Berenthal is now waiting on the next moves from the Trump administration, which said in June that it would be rolling back some of the new openings.
“There’s certainly a market,” Berenthal said. “There’s going to be a need for trucks in the large-scale transportation of goods, but also some of the smaller ones for private-sector transportation.”
Even the Cuban government has admitted its challenges with transportation and infrastructure, said Paolo Spadoni, Cuba expert and associate professor of political science at Augusta University.
Cuba was a large recipient of aid from Russia and imported thousands of trucks from its manufacturers when it was part of the Soviet Union.
“Cuba has been struggling with transportation since the 1980s when the Soviet Union collapsed. It has been the sector with the slowest recovery,” Spadoni said.
Due to financing problems, Cuba doesn’t have many options for getting vehicles, but China and Russia happen to be the two major countries that will export to them, he said.
Beginning in 2008 – the same year Fidel Castro resigned from the Cuban presidency and his brother Raul took power – Russian truck manufacturer Kamaz began delivering trucks to the island. Over the next few years, Kamaz exports increased, reaching 900 by 2013.
In 2009, Cuba began importing sedans from Chinese automaker Geely for use as police cars, taxis and other commercial vehicles.
Last year, Kamaz signed a contract with the Cuban government to deliver 2,400 trucks as well as “automotive equipment, spare parts and the equipment necessary for the installation in Cuba of a network of repair plants.”
American Manufacturers Interested in Market
American truck and equipment manufacturers have already expressed interest in the Cuban market. Last year, Ford, GM and Fiat Chrysler Automobiles said they were watching the market and awaiting changes to economic policies.
While GM didn’t share specifics, a company spokesperson told Trucks.com that it “will certainly evaluate any opportunity that may present [itself] as developments warrant.”
In 2016, Doug Oberhelman, chief executive of equipment manufacturer Caterpillar Inc., made a high-profile trip to the island to meet with Cuban ministers and said his company was ready to enter the market once the U.S. embargo is lifted. Oberhelman expects Cuba’s new Port of Mariel to grow into a thriving distribution point for the Caribbean and Central and South America.
The first wave of demand may be for used trucks, said John Kavulich, president of the U.S.-Cuba Trade and Economic Council.
While Cubans prefer the quality of American vehicles, they also desire a low price and simplicity, Kavulich said.
“Cuba simply isn’t in need of a lot of the technology that generally comes with newer trucks. They’re more inclined to go with what is simple to operate, simple to repair and will have a long shelf life,” he said.
Russian and Chinese vehicles are not the most technologically-advanced, but “much like the AK-47,” they are simple machines, Kavulich said.
A Challenging Market Regardless
Even if the U.S. government loosened the reins of the embargo, truck manufacturers may still find Cuba to be a difficult market.
Due to its state-controlled economy, truck buyers in Cuba would be government entities, not businesses, Kavulich said.
Two of the biggest potential customers would be the Ministry of Transportation and CIMEX, a military-owned conglomerate for transportation products, he said. “You can’t import on your own. The government is in charge, and you have to depend on what it is willing to sell you.”
An even bigger problem is that Cuba has a poor credit rating and has historically had difficulty meetings its financial obligations, said Spadoni.
The country defaulted on all of its foreign debt in the 1980s and has recently restructured all of its debt with Mexico, Russia and commercial creditors in China and Japan.
“They’ve always had liquidity problems,” Spadoni said. “Even if you lift the embargo, it’s also contingent on the financial situation in Cuba to give guarantees.”
Craig Guillot, trucks.com
August 23, 2017