Abstract
Argentina’s 9% month-on-month (m-o-m) increase in vehicle sales in June,
to 43,802 units, has led many
– including the Argentine Asociacion
de Concesionarios de Automotores (Acara) – to believe that the
country’s autos market will begin to rebound. However, as BMI explains
in this Q09 Argentina Autos
Report, private consumption is still likely to
be dented by the rising unemployment level and the
weakening exchange
rates. The consumption should be dented by nearly 1.4% year-on-year
(y-o-y)
decline this year and a further 1% fall in 2010.
With our
forecast of a 1% y-o-y fall in the country’s real GDP this year and a
further 0.9% contraction
next year, we caution that Argentina is likely to
be more deeply affected by the ongoing crisis than other
regional markets
(such as Brazil) will be. Within the autos industry, Brazil has been largely
helped by the
ongoing industrial tax break, which has resulted in robust
sales growth in the market. In Argentina, on the
other hand, demand has
remained almost unmoved by the US$1bn low-cost loan package introduced by
the government in December of last year, which indicates the degree of
pessimism in the market. In view
of this, BMI has maintained its sales
forecast of a more than 17-18% y-o-y fall in sales – to around
509,000 units this year. This is likely to be followed by a further 3.5%
decline in 2010, to nearly 495,900
units. Although the market is likely to
recover thereafter, it will be unable to reach its pre-crisis level until
2013.
Meanwhile, Argentina’s export-oriented production suffered
adversely from slowing economic activity in
its neighbouring markets such
as Brazil, Mexico, and Chile. National carmakers therefore continued to
cutback production by 31.5% y-o-y – to 196,106 units – in H109.
BMI forecasts the end of year
production will fall by 27-30% this year, to
12.5mn units. However, we see plenty of upside potential
once the market
recovers in 2011. At this point, growth is likely to be led by the influx of
new
investments in the industry. Chinese carmaker, Chery, has announced
one such investment in a new
assembly plant in the Chaco Province, in
northern Argentina. Chery’s investment will add to the
production
capacity that is already provided by locally operating foreign carmakers
– General Motors,
PSA Peugeot Citroën, Toyota Motors and
others.
In BMI’s Business Environment Ratings for the autos industry
in America, Argentina has increased its
score this quarter (by 1.5 points)
to 61.2 points. The increase comes from significant improvements in its
limits of potential returns in the country and improved scores on risks to
realisation of returns. This
implies that although Argentina may be poorly
hit by the ongoing economic crisis, there remains plenty of
potential for
new investments in the long term.
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