Brazil/Argentina: combined production capacity to reach 5.87 million units in 2014
New vehicle sales in Brazil grew to 3.14 million in 2009,
manufacturers launching more vehicles designed for South American Market
Combined production capacity in Brazil and Argentina totals 4.78 million a year; plant...
Fiat, VW, and GM each to increase annual production capacity in Brazil to 1 million; Ford...
Renault increasing vehicles produced in Argentina; likewise for PSA in Brazil
Toyota started constructing new plant in Brazil, Honda and Hyundai Motor resume construction...
Collaborative report with IHS Global Insight
Mid-term Production Forecast
In 2009, sales of new vehicles in Brazil increased 321,000 units year-on-year, to 3,141,000, surpassing the 3-million mark for the first time. Among this figure, Light Vehicle flex-fuel vehicles accounted for 88.2% of all vehicles sold. This is up 1 percentage point year-on-year. The volume of vehicles exported from Brazil fell by 259,000 units, to 475,000, with production volume declining 33,000 units, to 3,183,000. The decrease in exports is due to the slumping markets in both Argentina and South Africa, two of Brazil's major export markets.
In December 2009, the Brazilian Association of Automotive Vehicle Manufacturers (ANFAVEA) announced its forecast for 2010. It estimates that new vehicle sales, exports, and production will grow by 9.3%, 12.2%, and 5.4%, respectively.
In Argentina in 2009, unit sales of new vehicles fell by 125,000 year-on-year, to 487,000. The volume of vehicles exported also fell, by 29,000, making the yearly total 322,000. And production volume was down by 84,000 units, to only 513,000.
The combined production capacity of major auto makers in both Brazil and Argentina is 4.78 million units a year, with Brazil accounting for 3.9 million and Argentina for 880,000. The top selling auto manufacturers (Fiat, VW, GM, and Ford) are all planning to expand their existing production facilities. Fiat, VW, and GM are each planning to boost their production capacity to 1 million a year in Brazil.
In addition, Toyota, Honda, and Hyundai Motor will construct new plants. And China-based Chery Automobile announced that it has plans to build a plant in Brazil. As a result, the combined production capacity in Brazil of all manufacturers will increase by 1.05 million by 2014 and surpass the 5-million mark. In Argentina, the combined production capacity is expected to grow by 30,000 by 2014 and reach a level in the 900,000s.
In line with each auto manufacturer increasing its scope of production, each is actively developing and launching new vehicle models designed for the South American market.
■Major auto manufacturers' production and development activities on new vehicles designed for South American market
|Production base||Production and development activities on new vehicle models|
|Fiat||Brazil||The company is currently developing successors to the Uno and the Palio in Brazil, with plans to start producing them in 2010 in Brazil. Both vehicles will be produced and marketed in Europe also.|
|VW||Brazil||The company is currently developing a new vehicle model in Brazil. So far, the details haven't been announced.|
|Argentina||In 2009, VW started producing the Amarok, the first pickup developed by the company. (The truck was developed in Europe.) The company plans to export it to Europe also.|
|GM||Brazil||The company is currently developing two new Chevrolet vehicles in Brazil.|
|Argentina||In 2009, the company started production of a new vehicle, the Chevrolet Agile, which it developed in Brazil. It is marketed within the MERCOSUR region.|
|Ford||Brazil||The company is currently developing several new models.|
|Renault||Argentina||The company started producing a new vehicle model, the Symbol, which is a sedan version of the Clio that was developed in Europe and Turkey. Production began in 2009. The company is selling it in South America.|
|PSA||Brazil||In Brazil, the company is currently developing a Brazilian version of the Citroen C3 Picasso that was developed in Europe; and developing the Peugeot 207 Pickup, a new vehicle model based on the Peugeot 206. Production is expected to begin in 2010.|
|Toyota||Brazil||The company is expected to begin production of the Etios at a new plant at the end of 2010 in Brazil, following its production launch in India. This is a new vehicle designed for the BRIC market.|
|Honda||Brazil||In 2009, the company started production of the City. This vehicle is designed for the South American market but is based on a model being produced in Thailand.|
|Argentina||The company in 2010 is planning to launch operations at a new plant. The company hasn't announced which vehicles it will produce there.|
|Brazil||It is believed that the company will produce the i20 and an SUV at its new plant scheduled to start operations in 2011.|
|■Brazil: production, export, and new vehicle sales||(units)|
|New vehicle sales||1,428,610||1,578,775||1,714,644||1,927,738||2,462,728||2,820,350||3,141,240|
|Source: Brazil National Association of Vehicle Manufacturers (ANFAVEA)|
|(Note) 1.||Production and export figures include CKD.
New vehicles sales, including imported cars, are on a registration basis.
|2.||New vehicle sales by auto manufacturer are shown at the end of this report.|
|■Sales of light vehicles in Brazil by fuel type||(units)|
|Light Vehicle total||1,291,750||1,523,521||1,618,947||1,831,712||2,341,032||2,670,991||3,008,742|
|(Note) 1.||Figures represent sales of new passenger cars and light-duty commercial vehicles and are on a registration basis. Medium-/heavy-duty commercial vehicles are not included.|
|2.||In Brazil, gasoline contains 20-25% ethanol. Flexible fuel vehicles (FFV) are able to run either entirely on ethanol; or on a gasoline/ethanol blend, the percentage of which is on an arbitrary basis. FFVs were launched in 2003 and offer an advantage to customers in terms of enabling them to select the type of fuel they want to use depending on the price.|
|3.||"FFV Ratio" means the percentage that flexible fuel vehicles account for of new passenger car and light-duty commercial vehicle sales.|
|■Argentina: production, export, and new vehicle sales||(units)|
|New vehicle sales||155,640||311,961||402,690||460,478||564,926||611,770||487,142|
|Source: Argentine Association of Automobile Manufacturers (ADEFA)|
|(Note)||New vehicle sales means sales to dealers.
New vehicle sales by auto manufacturer are shown at the end of this Report.
■Combined production capacity in Brazil and Argentina totals 4.78 million a year; plant expansion and new plant construction projects will increase capacity by 1.08 million
In early 2010, the combined annual production capacity in Brazil and Argentina of major auto manufacturers was 4.78 million, with Brazil accounting for 3.9 million and Argentina for 880,000. Auto manufacturers having large production capacities include Fiat at 1.02 million (800,000 in Brazil and 220,000 in Argentina); VW at 900,000 (800,000 and 100,000), GM at 900,000 (800,000 and 100,000), and Ford at 590,000 (500,000 and 90,000).
In Brazil, Fiat, VW, and GM are each planning to boost the production capacities of their existing plants in the range of 200,000 a year, while Ford is planning to boost it in the range of 50,000.
In Brazil, Toyota is currently constructing a new plant that will be capable of producing 150,000 a year; and in Argentina, Honda is building a new plant that will be capable of producing 30,000 a year. Also in Brazil, Hyundai Motor is planning to begin constructing a new plant in the first half of 2010 capable of producing 100,000 a year. In May 2009, China-based Chery Automobile announced that it plans to build a plant in Brazil, which will have a production capacity of 150,000 per year.
■Brazil: major auto manufacturers' plants
|Production vehicle models|
|Fiat Automoveis S.A.||Betim||800→ 1,000||Fiat Doblo, Idea, Linea, Palio, Punto,
Siena, Stilo, Uno, Fiorino, Strada
|Volkswagen do Brasil
|Anchieta||800→ 1,000||VW Gol, Voyage, Polo, Kombi, Saveiro|
|Taubate||VW Gol, Parati|
|Curitiba||VW Golf, Fox|
|General Motors do
|800→ 1,000||Chevrolet Astra, Vectra, Classic (Corsa sedan)|
|Sao Jose dos
|Chevrolet Corsa, Meriva, Zafira,
Blazer, Montana, S10
|Gravatai||Chevrolet Celta, Prisma|
|Ford Motor Company
|Camacari||250→ 300||Ford EcoSport, Fiesta, Fiesta Sedan|
|250||Ford Fiesta, Ka, Courier, F-Series, Trucks|
|Porto Real||150||Peugeot 206/207 (Note 2)|
|Citroen C3, Xsara Picasso|
|Renault do Brasil S.A.||Sao Jose dos
|170||Renault Logan/Nissan Aprio|
|Renault Megane, Sandero, Scenic, Master|
|Nissan Livina, Grand Livina,
Livina X-Gear, Frontier
|Toyota do Brasil Ltda.||Indaiatuba||70||Toyota Corolla|
|Sorocaba||0→ 150||(The company plans to begin producing
a new vehicle model, the Etios, in 2011.)
|Honda Automoveis do
|Sumare||120||Honda City, Fit, Civic|
|(Hyundai)||Piracicaba||0→ 100||(The company plans to begin producing vehicle
models such as the i20 and an SUV in 2011.)
|Chery Automobile||n.a.||0→ 150||(Production is planned to begin in 2012.)|
|Juiz de Fora||60||M-Benz C-Class|
|60||M-Benz Trucks, Buses|
|Iveco Latin America
|Sete Lagoas||60||Iveco Daily, Fiat Ducato,
Peugeot Boxer/Citroen Jumper, Iveco Trucks
e Onibus (MAN)
|Resende||75||VW Trucks, Buses|
|Scania Latin America
|20||Scania Trucks, Buses|
|Volvo do Brasil
|Curitiba||120||Volvo Trucks, Buses|
|MMC Automotores do
|Catalao||50||Mitsubishi L200 pickup (Triton),
Pajero TR4 (io),Pajero Sport (Challenger)
|Caoa Montadora de
|Anapolis||50||Hyundai HR (Porter)|
|Total annual production capacity will increase from 3,905,000 to 4,955,000|
|(Note) 1.||The two companies listed last (light blue areas) were established with local capital.|
|2.||The Peugeot 207, which PSA produces in South America, is designed exclusively for the South American market. It is based on the 206.|
|3.||China-based Chery Automobile announced in May 2009 that it plans to build a plant in Brazil. In January 2010, the company inspected a plant site in Mato Grosso do Sul. It plans to build a plant capable of producing 150,000 units a year, with production to start in 2012.|
|4.||Caminhoes e Onibus, which Volkswagen sold to MAN at the beginning of 2009, continues to sell VW vehicles as a subsidiary of MAN Latin America. In October 2009, MAN Latin America announced that it would start producing heavy-duty trucks under the MAN brand. It initially plans to produce the 100 units covering the contracts it signed with three transportation companies in Brazil.|
■Argentina: major auto manufacturers' plants
|Production vehicle models|
|Fiat Auto Argentina S.A.||Ferreyra||220||Fiat Siena, Palio|
|Iveco Argentina S.A.||Ferreyra||10||Iveco Buses, Trucks|
|Volkswagen Argentina S.A.||General Pacheco||100||VW Fox, Suran (SpaceFox), Amarok, Caddy|
|Cordoba||100||Chevrolet Agile, Corsa|
|Suzuki Vitara/Chevrolet Tracker|
|Ford Argentina S.A.||General Pacheco||90||Ford Focus, Ranger|
|Villa Bosch||125||Peugeot 206/207, 307, Citroen C4, Peugeot Partner/Citroen Berlingo|
|Renault Argentina S.A.||Cordoba||150||Renault Symbol, Clio, Kangoo|
|Gonzales Catan||20||M-Benz Sprinter, Buses|
|Toyota Argentina S.A.||Zarate||65||Toyota Hilux, Hilux SW4 (Fortuner)|
|Honda Motor de
|Campana||0→ 30||(Operation is scheduled to start in April 2010)|
|Total annual production capacity will increase from 880,000 to 910,000.|
|(Note) 1.||It is unknown when Honda will start volume production at its new plant.|
|2.||In February 2009, China-based Chery Automobile announced that it will build a new plant in Argentina based on a joint venture, with plans to start production in 2011. However, further developments regarding this project are unknown.|
■Fiat, VW, and GM each to increase annual production capacity in Brazil to 1 million; Ford also plans to boost capacity
■VW announces plans to increase annual production capacity in Brazil to 1 million; launches production of new pickup in Argentina
VW is planning to enhance its two plants in Brazil so as to boost its production capacity by 200,000 by 2014, when it will have a total capacity of 1 million. In Argentina, the company started producing its first proprietary pickup, the Amarok, in December 2009. It plans to export it to Europe starting in the summer of 2010.
■In Brazil, VW boosts its production capacity from 800,000 to 1 million a year
|VW will invest a total of 2.3 billion Euros mainly to develop new vehicle models and enhance its production capacity at its Brazilian operations during the five years from 2010 to 2014, as announced in November 2009. The plants to be expanded are the Anchieta plant and the Taubate plant. VW plans to boost its annual production capacity in Brazil from the current 800,000 to 1 million.|
|In December 2009, VW started producing its new pickup, the Amarok, at its General Pacheco plant in Argentina. The Amarok is the first pickup truck that VW developed. It comes with a 2.0L diesel-powered engine. Initially, only a double-cab is available, but a single-cab will also be made available in 2011.|
|VW is going to produce a maximum of 90,000 Amaroks a year, planning to export 80% of them. It will begin exporting them to countries in South America, mainly to Brazil, at the beginning of 2010, with plans to start selling them in Europe in the summer of 2010.|
■GM boosts annual production capacity in Brazil to 1 million; produces new vehicle, the Agile, in Argentina
GM is planning to boost its production capacity in Brazil by 200,000 units to achieve 1 million a year by 2012. In addition, the company will develop two new vehicle models designed for South America under the Chevrolet brand. In September 2009 in Argentina, it started producing the Chevrolet Agile, a new vehicle model that it developed in Brazil.
■GM in Brazil will develop two new vehicle models designed for South America, with plans to enhance its Gravatai plant
|GM will invest a total of 200 million real (approximately USD100 million) in its business in Brazil between 2009 and 2012, as announced in July 2009. Of the total, 140 million real will be used to develop two new Chevrolet vehicles designed for South America, which GM will produce in Brazil; and enhance its Gravatai plant in Brazil. The production capacity of the Gravatai plant will be increased to 380,000 a year.|
|In September 2009, GM started producing the Chevrolet Agile at its Cordoba plant in Argentina. The Agile is a new vehicle model developed at the Center for Development of Vehicles in Brazil. The company invested USD 400 million in the development and production of the Agile, which will be marketed in Brazil, Argentina, Paraguay, and Uruguay.|
■Ford developing new models to be produced in Brazil; company boosting annual production capacity by 50,000, for yearly total of 550,000
Between 2010 and 2014, Ford will revamp its plants in Brazil and develop new models that it will produce in Brazil. The company will boost the production capacity of its Camacari plant by 50,000, so the yearly total will reach 300,000 a year. The combined production capacity, which includes that of its Sao Bernardo do Campo plant, is planned to reach 550,000 a year.
■Ford increases annual production capacity of its Camacari plant in Brazil from 250,000 to 300,000
|Between 2010 and 2014, Ford will invest a total of USD 2.3 billion to revamp and enhance its production facilities in Brazil and in developing new models that it will manufacture in Brazil, as the company announced in November 2009. The company plans to boost the production capacity of its Camacari plant, which produces the EcoSport and Fiesta, from the 2009 level of 250,000, to 300,000 a year.|
■Fiat develops successors to Palio and Uno in Brazil
Fiat is currently developing successor vehicles to the Palio and the Uno in Brazil, expecting to start production of them in 2010. The company is also considering producing Chrysler's pickup, the Dodge Dakota, in Argentina.
■Fiat to develop and produce successors to the Palio and Uno in Brazil
|Fiat is currently developing successor vehicles to the Palio (development code: Project 326) and the Uno (development code: Project 327) in Brazil. The company is expected to begin producing the two vehicle models in 2010. Between 2007 and 2010, Fiat is currently making an investment of 2 billion Euros in its business in South America, planning to boost the production capacity of its production facilities in Brazil to 1 million a year by 2010.|
|(Note)||The successor to the Palio is rumored to come in various derivative models, including 3- and 5-door hatchbacks, a station wagon, a sedan, and a pickup.|
|Fiat is considering producing the Dodge Dakota in Argentina, a pickup that Chrysler plans to discontinue producing by the end of 2011. When production operations are transferred to Argentina, the truck will probably be marketed under the Fiat brand.|
|(Note)||Fiat has been planning to produce one of Tata's pickups on an outsourcing basis, but the project is being held up due to circumstances at Tata.|
■Renault increasing vehicles produced in Argentina; likewise for PSA in Brazil
■Renault's Argentine plant positioned as an export hub for the Clio/Symbol and Kangoo
In February 2009, Renault began producing the Symbol in Argentina. The company has positioned its Santa Isabel plant in Argentina as an export hub for the Clio/Symbol and Kangoo.
■Renault starts producing the Symbol at Argentine plant
|In February 2009, Renault began producing its Renault Symbol at its Santa Isabel plant in Cordoba, Argentina. The Symbol, which is designed for the South American market, is a sedan based on the Clio. The Curitiba plant in Brazil supplies engines while the Cormecanica plant in Chile supplies manual transmissions. The South American content ratio is 80%, with 50% procured in Argentina and 30% in Brazil, Chile, and other countries.|
|Sources: Renault News Release 2008.12.23, etc.|
|(Note)||Renault plans to position its Santa Isabel plant as an export hub for the Clio/Symbol and Kangoo. With the start of production of the Symbol, the company discontinued production of the Megane in January 2009.|
■PSA will produce a new MPV and pickup in Brazil
PSA is planning to start production of a new MPV and pickup in Brazil in 2010.
■PSA will produce a new MPV and pickup in Brazil
|In 2010, PSA plans to begin producing the Citroen C3 Picasso, a new MPV; and the Peugeot 207 Pickup in Brazil. The Peugeot 207 Pickup is based on the 207, which was developed in Brazil and based on the 206. The 207 is a different model from the 207 designed for Europe.|
■Toyota started constructing new plant in Brazil, Honda and Hyundai Motor resume construction of their new plants
■Toyota is expected to produce a new vehicle model, the Etios, at its new plant in Brazil starting in 2011
In August 2009, Toyota began constructing its new plant in Sorocaba, Brazil, planning to start operations in 2011. The new plant is expected to manufacture the Etios, a new vehicle model designed for the BRIC countries and unveiled in India in January 2010.
■Toyota's second plant in Brazil to come online in 2011: plant expected to produce a new vehicle model, the Etios
|In January 2010, Toyota unveiled a concept car of its new vehicle, the Etios, at the Delhi Auto Expo in India. The concept car is believed to be a close prototype of the actual vehicle scheduled for mass-production. The company plans to start producing the vehicle first in India at the end of 2010 and in Brazil in 2011. The Etios, which is based on a new platform, will come in both hatchback and sedan models. It comes with a 1.2L/1.5L engine. It is believed that the selling price will be approximately USD 10,000.|
|In August 2009, Toyota started constructing a new plant in Sorocaba, Sao Paulo, Brazil on a site it acquired in July 2008. The company plans to start operations in 2011. The initial production capacity will be150,000 a year, which will be increased to 400,000. Incidentally, the existing Indaiatuba plant, which produces the Toyota Corolla, is capable of producing 70,000 a year.|
■Honda's new plant in Argentina to come online in spring 2010; company adding the City to production lineup in Brazil
Honda's new plant in Argentina will commence operations in the spring of 2010, about half a year later than originally planned. Honda suspended construction activities at the plant in 2009. However, the exact timing when the plant will start full commercial production is still not known. In Brazil, where Honda manufactures its current Fit and Civic models, it added the City to its production line up in July 2009.
■Honda's new plant in Argentina to come online in April 2010
|Honda is currently building a new plant in Campana, Buenos Aires, Argentina, expecting to start operations in April 2010. The new plant will be capable of producing 30,000 units a year. However, it is still not know when it will begin full volume-production. The new plant was originally planned to start operations in the second half of 2009, but construction at the plant was suspended due to the global economic downturn.|
|In July 2009, Honda started producing and selling the City FFV (Flexible Fuel Vehicle) in Brazil. In addition, it began exporting the gasoline-powered City to Mexico in September 2009, planning to gradually start exporting it to countries in South America. (Pilot production of the gasoline-powered City was started in January 2009). The City being manufactured in Brazil is designed for the Brazilian and South American markets and is based on the 3rd-generation City produced in Thailand.|
■Hyundai Motor to begin constructing new plant in Brazil, plans to start operations in the latter half of 2011
Hyundai Motor will begin constructing a plant in Brazil in the first half of 2010, planning to start operations in the second half of 2011. The new plant, which will be capable of producing 100,000 units a year, is planning to produce the i20 and others.
■Hyundai Motor is expected to start constructing new plant in Brazil in the second quarter of 2010
|Hyundai Motor will begin constructing a new plant in Piracicaba in the state of Sao Paulo, Brazil in the second quarter of 2010. Construction was postponed due to the global economic slowdown. The new plant is expected to start commercial operations as early as the second half of 2011. It will initially be capable of producing 100,000 units and manufacture the i20 and SUVs.|
|■Brazil's new vehicle sales by auto manufacturer (on wholesales basis)||(units)|
|VW Caminhoes e
|(Note) 1.||The data includes imported vehicles. "Others" (second to last row) represents sales of vehicles imported by non-ANFAVEA members.|
|2.||Figures for 2009 show the total number of registered new passenger car and light-duty commercial vehicles; and the wholesale volume of trucks (both medium- and heavy-duty) and buses.|
|3.||Up to 2005, sales of Mercedes Benz are included in those of DaimlerChrysler. Mercedes Benz sales in 2005 totaled 40,320 units.|
|4.||MMC Automotores produces and sells Mitsubishi brand vehicles on consignment.|
|5.||VW Caminoes e Onibus is VW's truck and bus division. Company data is included under VW up to 2005. In 2005, VW Caminoes e Onibus' sales were 27,043 units. VW sold Volkswagen Caminhoes e Onibus to MAN in 2009. MAN continues to produce and sell vehicles under the VW brand.|
|■Argentina's new vehicle sales by auto manufacturer||(units)|
|(Note) 1.||"Others" (second to last row) shows sales of vehicles imported by non- ADEFA members, including parallel imports.|
|2.||Data for Mazda, Jaguar, Volvo and Land Rover is included under Ford.
Data for Suzuki and Isuzu is included under GM. Data for Nissan is included under Renault.
|3.||The data in blue for Mercedes and Chrysler are included under DaimlerChrysler up to 2007.
The data for Chrysler is included under "Others" from 2008 and after.
|Brazil: Light vehicle production by Manufacturing group (IHS Global InsightForecast)||(Unit)|
|Argentina: Light vehicle production by Manufacturing group (IHS Global InsightForecast)||(Unit)|
1. Data indicate figures of only small-size vehicles, including passenger cars and light commercial vehicles with a gross vehicle weight of under 6 tons. Trucks and buses in the segment of larger than medium-size vehicles are not included.
2.Data for 2009 are based on estimated figures.
3. All rights reserved. Reproduction of any data will require permission of IHS Global Insight.
IHS Global Insight Report (Released on 11 Jan 2010)
Brazil: Brazilian Light-Vehicle Sales Finish 2009 with 51.1% Y/Y Jump in December; Production Skyrockets 164%
Brazilian vehicle sales ended 2009 on a high note, while production soared as automakers attempted to catch up with the increase in demand.
IHS Global Insight Perspective
Despite the elimination of tax incentives, vehicle sales remained strong in December, up 51.1% year-on-year (y/y), meaning that full-year sales were up 12.6% from 2008.
December 2008 was not a great month for sales, making the y/y comparison somewhat skewed, but the fact that sales remained high last month despite the ending of government tax incentives is encouraging.
Brazil's strong economy and quicker recovery than the rest of the world have led to positive sales and production forecasts for 2010.
Production rose dramatically during December as automakers rushed to meet returning demand. Light-vehicle production soared 163.9% y/y to 237,239 units, although this was 13.6% lower than November's 237,010 units. Overall for the year, production was up only marginally, by 0.7% to 3.025 million units. Exports, a mainstay of the economy, also saw some return to growth in the final month of the year, but again this was against a low base of comparison as December 2008 was a terrible month. Light-vehicle exports were up 22.3% y/y in December 2009 at 50,407 units, with the tally rising 6.5% m/m. For the full year 2009, exports were down sharply, by 33.6% to 451,924 units, as the rest of Latin America cut back on purchases. A return to sustained export growth is the biggest challenge for the Brazilian market, according to Schneider, especially in the face of a 34% appreciation in the value of the Brazilian real against the U.S. dollar. This is also likely to make imported vehicles more of a threat to locally made products. "We will have to fight to get back our pre-crisis market share because of difficult market conditions and the strength of the Brazilian real", said the executive.
Last month, Schneider stated that Anfavea expected sales of 3.4 million vehicles in 2010, and production of 3.39 million units. "The forecasts are positive and realistic because we expect higher incomes and more consumption in Brazil next year", he said. These forecasts have been maintained following the December results, according to reports. In a tough global market, Brazil's robust performance has been a bright spot and a saving grace for the big four vehicle manufacturers operating in the country—Fiat, Volkswagen (VW), General Motors (GM), and Ford. VW finished 2009 on top of the Brazilian market with sales of 627,915 cars, up 19.1% y/y. Fiat came second with sales of 619,017 and more modest growth of 11.0% y/y; GM sales rose 7.2% y/y to 502,320 units; and Ford registered 22.7% y/y sales growth to 235,063 units. In December, the sales title went to Fiat, however, which recorded a 54.2% y/y boost to 54,440 units, while VW posted a weaker increase of 39.7% y/y to 51,952 units.
Outlook and Implications
December's sales numbers were strong, but the percentage gains must be taken in context: December 2008 was one of the weakest months in years, distorting the y/y comparisons. Nevertheless, despite the gradual phasing out of tax incentives, the car market continued to witness very respectable demand during the month. The tax incentives provided by the government for new car purchases last year resulted in a roughly 7% discount for new vehicles, according to Anfavea. This helped Brazil weather the worst of the downturn quite well, and indeed it was able to report a third consecutive year of record growth. This was largely thanks to the government's astute strategy in combating the recession. The overall Brazilian economy is looking significantly stronger than many of its counterparts, although the government must remain cautious with regards to the extension of its anti-crisis measures. However, it is indicating that it will continue doing whatever it can to protect vulnerable sectors and stimulate faster economic growth, as demonstrated by the decision to maintain some incentives in the car market.
The growth in the Brazilian vehicle market last year underlined the success of the government's significant and multi-layered approach to stimulating sales. The extended suspension of the IPI purchase tax, coupled with the Central Bank of Brazil's efforts to underpin car financing operations in the country, lifted new car buyers' confidence, as did the significant drop in car prices. Nevertheless, Anfavea and other observers, including IHS Global Insight, remain concerned that the interim reduction in the purchase tax will result in a conclusive drop in sales volumes now that this support has been withdrawn completely. However, this sentiment is tempered by the better-than-expected results for 2009: Anfavea had expected production to fall by 5.2% y/y last year, the first decline since 2002, yet production actually slipped by only 1.0%, including heavy commercial vehicles, buses, and trucks.
The cost of the IPI tax break to the government amounted to roughly 1.36 billion reais (US$612.8 million) per quarter. The automotive industry accounts for roughly 8% of GDP in Brazil, which has made support for the sector a government priority. At the same time, the government has worked aggressively to reduce the spread on automotive credit lines, with banks, including the Central Bank of Brazil, reducing short-term interest rates (SELIC). The SELIC has been heavily discounted in recent months and currently stands at 8.75%. IHS Global Insight now expects some moderate growth in 2010, given the reduction in interest rates, which is making borrowing cheaper, while financing plans of 72 and 84 months are surfacing again, which should also boost demand despite the absence of the tax incentives that kept sales afloat during the recession months.
IHS Global Insight Report (Released on 13 Jan 2010)
Argentina: Argentine Vehicle Sales Rise 25% Y/Y in December, Production Leaps 112% Y/Y
Argentine vehicle sales rose for the second month in a row during December, although this was largely thanks to a low base of comparison.
IHS Global Insight Perspective
December's figures for Argentine vehicle sales, production, and exports are heavily distorted by a low base of comparison, but they nevertheless show that the market stabilised at a consistent level during the latter half of 2009.
Much of Argentina's production and exports has been reliant on its neighbour and key export market, Brazil, which has performed well thanks to a strong economy underpinning demand in the market.
Stability in production and exports is likely in 2010, but the outlook for the domestic market is more cautious, particularly as political meddling worsens, with a likelihood of further mild contraction this year.
Argentine vehicle sales at the wholesale level (manufacturer to dealer) rose for the second successive month in December, helped by the extremely low base of comparison provided by the December 2008 data. According to data from local industry association ADEFA, light-vehicle sales rose 25.4% year-on-year (y/y) to 44,850 units in the month, which also equates to a 7.3% rise from November, when 41,818 units were sold. The December 2008 total was one of the lowest in Argentina for years as the country was in the grip of the global financial crisis and credit crunch, which affected many markets across the world. Light-vehicle sales at the retail level (dealer to consumer) were also up in December, by 18% y/y, but at the significantly lower level of 22,117 units, according to data from dealer association ACARA. The discrepancy between wholesale and retail sales is typical for December as dealers stock up for the strong sales month of January; furthermore, ADEFA includes heavy-truck and bus data in its figures. The ADEFA data put wholesales for the full-year 2009 down 20.4% y/y at 487,142 units, some 135,000 units lower than in the same period last year, while ACARA data show that retail sales at the light-vehicle level were down some 14.3% y/y at 492,905 units.
Argentine vehicle production meanwhile also rose for just the second time in 2009 during December, jumping 99% y/y to 53,152 units as the weak base comparison month of December 2008 again distorted the statistics. Production was again down slightly month-on-month (m/m), slipping 5.9% from November's 56,493 units. Production for the full year was down 14.1% y/y, but it appears evident that the crisis is subsiding and demand from the key export market of Brazil is helping normalise production levels in the Argentine auto industry. Exports rose by 112.3% y/y in December to 34,559 units, underpinned by the aforementioned demand from Brazil, although again the statistical rise is largely meaningless against the anomalous data of December 2008. Meanwhile, exports fell 12.1% m/m from November's 39,337 units. However, exports to all markets were down in full-year 2009 compared with 2008, by 8.1% y/y to 322,495 units. Nevertheless, this represented a considerable recovery from the situation earlier in the year and was largely thanks to the robust Brazilian economy and the successful stimulus packages operating within Argentina's neighbouring market.
Outlook and Implications
Argentina's vehicle market recorded its second rise of 2009 in December as the impact of the financial crisis that began in the final quarter of 2008 distorted the statistics. December's sales were marginally lower than the November total, which was itself a little lower than the October figure, but this is typical for this time of year and the figures underline the fact that sales have stabilised in Argentina at around 40,000-45,000 units per month, not a bad result given the fragile nature of the political and economic landscape.
The government's financial stimulus package, worth some 3.1 billion pesos (US$806.7 million) and intended to boost new vehicle sales in the country, has failed to have the desired effect despite offering cheap loans to first-time car buyers and driving the purchase of cheaper and fuel-efficient cars. Argentina's over-complicated and narrowly focused stimulus plans contrast sharply with the Brazilian government's package of measures, which has had clear success in mitigating the worst effects of the downturn. Dealer association ACARA has highlighted a local media study of the stimulus plan that indicated that only about 5% of planned sales were completed thanks to the new government loan package. Dealerships say that the loans are too complex and apply to too few cars to boost sales. Indeed, local media have reported that public banks have had to return around 200 million pesos in government funds because of a lack of consumer interest in using the money to buy cars.
Overall economic expansion has slowed since September 2008 and there is little doubt that the global economic and financial crisis has taken its toll on Argentina. Lower commodity prices and weaker demand for the main Argentine exports have reduced both export and fiscal revenues, affecting growth prospects and the government's capacity to stimulate the economy. At the same time, expansion of domestic consumption, an important engine of growth in Argentina, has been decelerating as consumer confidence has shrunk in response to the deteriorating business climate. Worst of all, the financial system has become more cautious in its lending policies as non-performing loans (NPLs) are increasing, making it more difficult for consumers and firms to find adequate sources of financing. On the domestic front, the adverse business environment created by the government has hurt consumption and investment decisions, reducing domestic demand precisely when it is most needed. Moreover, far from saving the money accrued from fiscal surpluses during the last years of the boom --money that could now finance fiscal programmes during the downturn-- the government conducted an aggressive policy of fiscal expansion, creating unnecessary distortions in the economy. Furthermore, the government has now destabilised the role of the central bank by ousting its head without following the proper procedure over a disagreement on spending.