Argentina's production falls due to stagnant exports to Brazil

Sales decline 4% in January-July 2015 due to recession and inflation

2015/09/15

Summary

Argentine vehicle production and exports In Argentina, the automotive industry has been affected by recession, inflation and a lack of foreign currency. It is also impacted by weak economy in Brazil, Argentina's top export destination. Besides, the Argentine government's protectionist measures exert influence on the automotive industry.

 Argentine vehicle sales for 2014 decreased by 36.3% year-over-year (y/y) to 610,000 units while its production fell by 22.0% y/y to 620,000 units. Regarding sales, imported vehicle sales plunged due to the government's import regulations. Production dropped owing to slow import of automotive parts caused by foreign currency restrictions as well as sluggish sales in Brazil. Vehicle production and sales in the country continue to be slack into 2015. It is anticipated that a new administration to be inaugurated following the presidential election in October 2015 will introduce a policy such as the easing of the import restrictions to promote the automotive industry.


Related Report:
Brazil sales to drop 21% in 2015 due to weak economy (Sep. 2015)



Argentine production fell 12% in Jan.-Jul. 2015 due to declining exports to Brazil

 Argentine vehicle sales for 2014 decreased by 36.3% y/y to 614,000 units. Sales of imported cars, which accounted for more than half of total sales, dropped by 43.6% y/y to 341,000 units due to the government's import regulations. For the period from January to July 2015, sales of domestically-produced vehicles increased by 1.0% y/y while those of imports fell, resulting in a drop of 3.5% in total sales.

 Vehicle production for 2014 declined by 22.0% y/y to 617,000 units due to stagnant import of automotive parts because of foreign currency restrictions and sluggish sales in Brazil, Argentina's leading export destination. Production for the January to July period in 2015 also decreased by 11.8% y/y to 320,000 units as exports including those for Brazil plunged by 21.1% y/y.

New vehicle sales in Argentina Argentine vehicle production and exports

 


Argentine vehicle production and exports

(Units)
2010 2011 2012 2013 2014 Jan.-Jul.
2014
Jan.-Jul.
2015
Production 716,540 828,771 764,495 791,007 617,329 357,747 315,526
Exports 447,953 506,715 413,472 433,295 357,847 195,460 154,123
Export ratio 62.5% 61.1% 54.1% 54.8% 58.0% 54.6% 48.8%

(Note) Out of total exports, 120,616 units (78.3%) and 171,902 units (87.9%) were exported to Brazil for the period from January to July in 2015 and for the same period in 2014, respectively.

New vehicle sales in Argentina

Sales 698,404 883,350 830,058 963,917 613,848 360,615 348,061
   thereof: domestic 262,532 324,795 347,997 358,582 272,605 157,306 158,832
   thereof: import 435,872 558,555 482,061 605,335 341,243 203,309 189,229
Import ratio 62.4% 63.2% 58.1% 62.8% 55.6% 56.4% 54.4%

Source: Argentine Automobile Manufacturers Association (ADEFA)

 

 



Most OEMs' sales decline; Only Toyota enjoys sales increase

Argentine vehicle sales by OEM In 2014, leading OEMs including VW, PSA, GM and Renault-Nissan experienced a more than 40% decrease in their sales from the previous year. Ford's and FCA's sales also declined by more than 20% y/y. In contrast, only Toyota enjoyed an 11.3% increase in its sales. Toyota's Hilux pickup as well as the Corolla and Etios passenger cars supported its sales. It was reported that Toyota's financial service subsidiary which provides a favorable vehicle loan also helped boost its sales.

(Click here for "Vehicle sales by OEM in Argentina")


 



Government introduces Pro Cre Auto sales promotion policy for locally built vehicles

 The Argentine government introduced "Pro Cre Auto", its domestic sales promotion measures, for the period from June 2014 to January 2015. Pro Cre Auto offered auto loan programs for the domestically-produced vehicles and reductions in the prices of those vehicles by pressing the OEMs to trim prices. According to the government, Pro Cre Auto contributed sales of 30,000 units during the first stage (from June to September 2014).

 Meanwhile, the government of Argentina agreed on extension of the automotive pacts with Mexico and Brazil, respectively, in 2015. Although the initial plans intended to start free trade for finished vehicles with both countries in 2015, introduction of free trade was postponed.

Argentine government's automotive policies


 Domestic sales promotion:Pro Cre Auto
 In June 2014, the Argentine government disclosed "Pro Cre Auto" vehicle sales promotion measures. The plan offers a vehicle loan program for domestically-produced vehicles. The program provides funding from the National Bank at an annual interest rate of 17-19% for 60 months and up to 90% of the price of the vehicle with a ceiling of ARS 120,000. Besides, the government agreed with eight OEMs to reduce the prices of 26 domestically-produced models by 3-13%.
 1) 1st Phase
 The first stage of Pro Cre Auto was effective from June 24 to September 24, 2014. The plan initially covered 26 models and was extended to include 42 models belonging to eight OEMs: Fiat, Ford, GM, PSA, Renault, VW, Toyota and Honda. According to the Ministry of Industry of Argentina, the first stage of Pro Cre Auto granted loans for 29,300 vehicles with a total credit of ARS 3 billion. Owing to this program, the number of laid-off workers in the automotive industry decreased from 13,874 to 7,600.
  2) 2nd Phase
 The second stage was effective from September 25, 2014 to January 10, 2015. The plan had the same conditions as the first one and covered 24 models belonging to five OEMs (excluding Honda, Fiat and GM). The vehicle prices were raised by 5-7.5% from the first stage, reflecting the price hikes in the country. The OEMs participating in the program were not allowed to lay off any worker at their plants in Argentina.

 Import restrictions
 The Argentine government has introduced a preliminary screening regulation for import in February 2012. All importers must file Advance Affidavits for Imports (DJAI) with the authority to gain approvals to import any consumer goods. The approval processes are said to be unclear and often take a long time.
 The importer, after obtaining the government's approval, has to present the approval number of DJAI to the Central Bank to purchase foreign currency. Since Argentina suffers a chronic shortage of foreign exchange, purchases of foreign currency are often limited.

Argentine government's trade policies


 Automotive Pact with Mexico    
 The governments of Argentina and Mexico agreed on revision of the bilateral trade pact of the Mercosur-Mexico Automotive Agreement (ACE55) in March 2015. The two countries will continue to limit the amount of tariff-free export of finished vehicles, which was introduced in 2013 and initially scheduled to expire on March 18, 2015, until March 18, 2019.
 The two countries set the amount of tariff-free export of light vehicles at USD 575 million for 2015, and will gradually raise the amount every year to USD 638 million for 2018 final year. The exports over the limit will be subject to 35% tariff. The minimum local content remains to be 35% and will be raised to 40% in 2019.

 Automotive Pact with Brazil
 The governments of Brazil and Argentina agreed on extension of the bilateral automotive trade pact in June 2015. This pact is effective for the period from July 1, 2015 to June 30, 2016. Since the automotive industries in both countries have been severely impacted by weak economies, Brazil and Argentina decided to postpone introduction of free trade for vehicles for one year.
 Like the pact reintroduced in 2014, the new pact determines requirements including rules of origin and a ratio of exports between the two countries to correct automotive trade imbalance. The export ratio remains to be "1.50". In other words, when Argentina exports USD 1 million worth of vehicles to Brazil, the pact allows Brazil to export USD 1.5 million worth of vehicles to Argentina without tariffs.



Activities of OEMs: Ford, GM, Daimler, Renault-Nissan, and Honda

 In Argentina, many OEMs are suffering stagnant sales due to recession while quite a number of OEMs, anticipating economic recovery in the future, are renovating their production facilities and increasing the models to be locally produced to improve their competitiveness. Ford will invest USD 220 million in its plant to reform equipment for launching a new model while GM will spend USD 270 million to build a new engine plant. Daimler and Renault-Nissan Alliance have a plan to jointly develop a midsize pickup, which Nissan will manufacture at Renault's plant in Argentina starting in 2018.

Ford to invest USD 220 million to renovate production facilities

 In May 2015, Ford announced that it would invest USD 220 million in Argentina for the period from 2015 to 2016. In order to launch a new model, the company plans to renovate production facilities of its Pacheco plant as well as to develop parts to be locally produced.

GM to spend USD 270 million to build a new engine plant

 In July 2014, GM disclosed a plan to invest USD 270 million in its Rosario plant to build a new engine plant. The automaker intends to manufacture a new aluminum engine at the plant. Initially the company will produce 90,000 units of engines per year and export them mainly to Europe.

Daimler starts production of Vito commercial van

 Daimler has started production of the Mercedes-Benz Vito, a new midsize commercial van, at its Gonzales Catan plant at the end of June 2015. The company plans to export the model to other Latin American countries in the future.

Daimler and Renault-Nissan Alliance to jointly develop midsize pickup

 In April 2015, Daimler and Renault-Nissan Alliance disclosed a plan to jointly develop a 1-ton pickup truck. The new model will share some of the architecture with the all-new Nissan NP300 and feature a double cab. Nissan will build a new production line at Renault's Cordoba plant in Argentina to produce the new model for South America. The new production line is scheduled to be operational in 2018 with an annual production capacity of 70,000 units. Nissan will start production of the NP300 first, and then, will assemble the Renault and Mercedes-Benz pickup models to be jointly developed on the same line.

Renault to produce Logan, Sandero, and Sandero Stepway in Argentina

 In March 2015, Renault announced a plan to invest USD 100 million in the Cordoba plant to start production of the Logan compact car, the Sandero hatchback variant, and the Sandero Stepway SUV variant. These three models have been imported from Brazil, but will be locally produced in Argentina. Renault will start production of these models in June 2016. Recently, sales of Brazilian-made Logan and Sandero are declining in Argentina due to weak domestic economy and Pro Cre Auto domestic sales promotion measures.

Honda begins production of HR-V

 In April 2015, Honda began production of the HR-V (sold as the Vezel in Japan), a new SUV, at itsCampana plant. The model was released in the second quarter of the same year. The company plans to produce 15,000 units of the HR-V per year. It will not only be sold in Argentina but also be exported to other countries.

 



Statistics

Vehicle sales by OEM in Argentina

(Units)
2010 2011 2012 2013 2014 Jan.-Jul.
2014
Jan.-Jul.
2015
FCA 69,145 92,127 79,093 111,167 86,539 59,103 41,196
Ford 85,518 106,691 105,192 118,116 93,188 55,880 51,230
GM 112,213 146,814 131,521 141,149 77,636 44,340 46,549
Iveco 5,011 7,122 6,569 9,005 5,394 2,677 3,501
Mercedes-Benz 14,366 15,621 16,194 20,393 10,403 5,039 7,685
PSA 87,124 112,790 113,886 145,160 84,211 51,741 42,310
Renault 97,369 124,162 124,289 144,300 69,773 42,416 41,495
Scania 1,702 2,962 1,978 2,695 1,449 709 1,142
Toyota 33,012 36,197 49,301 56,187 62,511 37,395 35,327
VW 145,869 195,020 159,133 170,570 99,729 49,067 66,513
Honda 15,990 15,962 12,876 7,745 4,388 3,078
Sub-total 651,329 855,496 803,118 931,618 598,578 352,755 340,026
Others 47,075 27,854 26,940 32,299 15,270 7,860 8,035
Total 698,404 883,350 830,058 963,917 613,848 360,615 348,061
Source: Argentine Automobile Manufacturers Association (ADEFA) (MarkLines Data Center for the January-July period of 2015)
(Note)1. OEMs included in "sub-total" are members of ADEFA, which have production facilities in Argentina. Sales include each OEM's imported cars.
2. "Others" represent vehicles imported and sold by non-members of ADEFA, which do not produce their vehicles in Argentina. Since Honda did not produce vehicles in Argentina before 2010, its sales of 2010 are included in "Others."
3. Nissan's sales are included in Renault's sales. According to MarkLines Data Center, Nissan's sales for 2014 and the period from January to July 2015 are 5,916 and 4,040 units, respectively.

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