The Chinese cars that are changing Cuba

CNBC's Matt Clinch

The U.S.'s efforts to normalize relations with Cuba could eventually lead to an influx of American imports into the country. But when it comes to automobiles, one country has got there first: China.

Cuba has long been known for its 1950s American cars lining its streets, but Havana is now home to a small, but growing, number of brand new Asian automobiles which are altering the landscape.

Until recently, Cubans' choice of vehicles had be somewhat limited.

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After being hit by a U.S. embargo in 1960, residents have lovingly maintained a plethora of American Pontiacs, Buicks, Chevys and Cadillacs. The Communist country's close ties with the former-Soviet Union also means that there's also a large fleet of Russian Ladas from the 1970s and 1980s that outnumber the older American models.

But among the relics, a clutch of Chinese-made Geely CKs and South Korean Kias have found a home, after new laws that came into effect in January removed the limits on car purchases for the first time in 50 years.

Even before the reforms, workers at government ministries were allowed to import the cars, meaning that 10,000 Geely units were already in the country, according to China's Global Times, which cited statistics from the car manufacturer.

The Chinese company accounted for 50 percent of car imports in Cuba by the end of 2013, according to the newspaper, equal to the combined share of Kias, Peugeots and other brands.

'Out of reach'

But there's a problem facing many ordinary Cuban consumers tempted by one of these Asian motors: the price.

Using the Cuban convertible peso (CUC) - which is equivalent to the U.S. dollar and is used by tourists and the more affluent Cubans - a new car can be pricey. A vehicle that might cost the equivalent of around 20,000 CUCs ($20,000) in the U.S. or Europe would be worth around 80,000 CUCs in Havana.

"These vehicles are still very expensive and out of reach. Property transfer operations in Cuba are heavily taxed," Diego Moya-Ocampos, a country analyst at research firm IHS who deals specifically with Cuba, told CNBC via email.

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"The (Cuban) government is trying to fund public transport from revenues it collects from car sales. 75 percent of revenues and taxes from car sales are allocated to public transport funding. This significantly increases its costs in comparison with acquiring a vehicle outside Cuba."

Consequently, not many new vehicles have been sold in the last year. A report by Reuters in June - crediting information from Cuban website - stating that just 50 cars and four motorcycles had been sold in the first six months of the year. There are only 11 car dealerships in Cuba, with 4 in Havana, according to Moya-Ocampos.

Cold war finally over?

Mauricio Alonso, proprietor of a Havana-based holiday home, is one of many small business owners that have sprung up over the last five years after a package of reforms by Cuban President Raul Castro.

He told CNBC that price markups were a way of life, with even a liter of cooking oil costing around 200 percent more in Cuba.

"Even in the comedy shows screened on Cuban (government) TV, the comedians make jokes about this," he said. "I understand that the Cuban government doesn't have any other choice."

Alonso said on Wednesday that he had been celebrating with his neighbors, following President Barack Obama's move to improve its relationship with Cuba.

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Cuba's Classic Cars

The cold war between Cuba and the U.S. is "finally over," Alonso said, but stressed that the announcement was unlikely to mark the death knell for Cuba's classic American stalwarts.

"Some of the old cars working as taxis are really dangerous and big polluters. The authorities want them to fulfill higher standards," he explained. "But to replace the old cars would take a long time and cost a lot, many of them are still in good shape and are tourist attractions."

For now, Alonso is content with his 1984 Russian-built Moskovich, despite his two neighbors both having brand new cars.

"(It's) not very efficient but very strong and resistant and I still can find spare parts," he said.

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