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Argentina Autos Report Q3 2010
Management Report
Published: June 2010
Pages: 61
Tables: For full details, please email keithw@cmsinfo.com
From: GBP 353.33 Buy Now!
Research from: Business Monitor International
Sector: Automotive
In its latest ‘Argentina Autos Report’, BMI warns that Argentina may not be able to reach its full potential for production and exports should inflationary pressures and the instability of the peso be allowed to continue in the long term.
In its latest ‘Argentina Autos Report’, BMI warns that Argentina may not be able to reach its full potential for production and exports should inflationary pressures and the instability of the peso be allowed to continue in the long term.
Estimates from the Asociación de Fábricas de Automotores de Argentina (Adefa) show that Argentine carmakers increased output almost 74% year-on-year (y-o-y), to 124,377 units, during Q110, thanks to the doubling of exports and a 48% y-o-y increase in domestic demand, to 154,103 units in the threemonth period. Given the low base effect from last year’s sales, BMI forecasts a strong 14% y-o-y rebound in Argentina's production, to 580,000 units, this year.
However, we are doubtful if the trend will continue for the remainder of the forecast period as carmakers currently operating on reduced capacities may be put off by the lack of clarity in the direction of government policy and the unpredictability of the current administration ahead of the 2011 presidential elections. As such, we restrict Argentina's auto production to 827,300 units by the end of 2014.
Demand in 2010, on the other hand, is likely to suffer from inflation and the rising unemployment, resulting in just over 9% y-o-y growth in total sales. As far as the commercial vehicles segment is concerned, we expect business investment to remain fairly subdued for most of the year, meaning that businesses will continue to postpone their demand for commercial and industrial vehicles for the time being. All of these mean that a full recovery to pre-crisis level may not be possible until 2012. Adefa and the Republic of Argentina Automotive Dealers Association (ACARA) have therefore called for increased car financing and leasing to encourage sales.
However, the biggest attraction for carmakers in Argentina is its trade links with Brazil, which helps to assure them of possible strong returns in the long term. In view of this, market leader PSA Peugeot Citroën has invested EUR135mn (US$200mn) in Argentina as part of plans to launch a new mid-range vehicle in the country later this year, along with two new versions of models currently in its vehicle portfolio. Ford Motor has also revealed plans to invest ARS1bn (US$250mn) between 2010 and 2012 to build an all-new vehicle at its plant in Pacheco.
Although Argentina’s geographical location, trade links to surrounding markets, and strong economic activity are all incentives for carmakers to invest, a poor business environment marked by uncertain political landscape and inflation have dragged the country down from third to fourth place in BMI’s ratings for the auto industry in Latin America this quarter.
Estimates from the Asociación de Fábricas de Automotores de Argentina (Adefa) show that Argentine carmakers increased output almost 74% year-on-year (y-o-y), to 124,377 units, during Q110, thanks to the doubling of exports and a 48% y-o-y increase in domestic demand, to 154,103 units in the threemonth period. Given the low base effect from last year’s sales, BMI forecasts a strong 14% y-o-y rebound in Argentina's production, to 580,000 units, this year.
However, we are doubtful if the trend will continue for the remainder of the forecast period as carmakers currently operating on reduced capacities may be put off by the lack of clarity in the direction of government policy and the unpredictability of the current administration ahead of the 2011 presidential elections. As such, we restrict Argentina's auto production to 827,300 units by the end of 2014.
Demand in 2010, on the other hand, is likely to suffer from inflation and the rising unemployment, resulting in just over 9% y-o-y growth in total sales. As far as the commercial vehicles segment is concerned, we expect business investment to remain fairly subdued for most of the year, meaning that businesses will continue to postpone their demand for commercial and industrial vehicles for the time being. All of these mean that a full recovery to pre-crisis level may not be possible until 2012. Adefa and the Republic of Argentina Automotive Dealers Association (ACARA) have therefore called for increased car financing and leasing to encourage sales.
However, the biggest attraction for carmakers in Argentina is its trade links with Brazil, which helps to assure them of possible strong returns in the long term. In view of this, market leader PSA Peugeot Citroën has invested EUR135mn (US$200mn) in Argentina as part of plans to launch a new mid-range vehicle in the country later this year, along with two new versions of models currently in its vehicle portfolio. Ford Motor has also revealed plans to invest ARS1bn (US$250mn) between 2010 and 2012 to build an all-new vehicle at its plant in Pacheco.
Although Argentina’s geographical location, trade links to surrounding markets, and strong economic activity are all incentives for carmakers to invest, a poor business environment marked by uncertain political landscape and inflation have dragged the country down from third to fourth place in BMI’s ratings for the auto industry in Latin America this quarter.