Around 1,300,000 vehicles presently circulate in the Republic of Panama, of which 75% are passenger vehicles, 35% are pick-up trucks and commercial work vehicles; buses and microbuses account for about 8% of the market and other vehicles represent some 2.6%. Panama ranks 10th for the number of vehicles per capita in Latin America.
Factors driving demand for automobile sales and parts include an increased average income for the population; a high degree of urbanization; lower-than-expected price of vehicles, and better provision of roads in the country.
Summary
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In general, automotive parts competition is intense, with a broad range of quality and prices to choose from. A major factor affecting competition is the one-step distribution channel from importer/wholesaler, direct to the end-user, as practiced by the larger multi-store operators. Successful brands invest in seminars and product-training, merchandising material, promotional campaigns and catalogs in Spanish with vehicle applications and OEM cross-references. It is important to have catalogs updated with the correct vehicle models and specifications sold in this market, as they frequently differ from those in the U.S. Also, efforts should be made to educate counter salespersons and end-users as to parts compatibility and usage; e.g. many technicians will use Japanese spark plugs for Japanese and Korean cars, German plugs for European cars and U.S. plugs for U.S. cars.
The import climate for automotive parts is positive. Import duties are either zero or very low for U.S. parts, and customs clearance is relatively fast and straightforward. Additionally, Panama has a dollar-based economy, good transportation infrastructure and telecommunication systems, modern ports and excellent access to shipping and air transport. U.S. products enjoy a reputation for high-quality and are well accepted. There are no regulations, technical or safety standards for automotive parts.
In general, import duties on vehicle parts, lowered with the implementation of the Free Trade Agreement, in October 2012. Ad valorem import duties are levied on the CIF value plus a 5% value-added tax.
It is important to note that cars are not subject to import duties, regardless of national content of origin. They are, however, subject to a progressive sales tax based on the value of the car. The U.S. Panama Trade Promotion Agreement (TPA) does not, therefore, give a competitive advantage to U. S.-made cars. But, the TPA does give an advantage to U.S.-made automotive parts, which enter the market duty-free; there are no import restrictions on these products. Sub-sectors offering the best market opportunities are servicing equipment, tubes and tires, and engine parts.
Market Entry & Barriers
PANAMA