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Argentina Autos Report Q3 2011
Business Monitor International, May 2011, Pages: 58
The Argentina Autos Report provides industry professionals and strategists, corporate analysts, auto associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Argentina's automotive industry.
The outlook for Argentina's auto production is beginning to look optimistic. Thanks to two recent projects – the trade agreement signed between Argentina's President Cristina Fernández and her Venezuelan counterpart Hugo Chávez, and Fiat's plans to launch an Argentine-made model in Brazil – the country is finally bagging deals that will allow it to benefit from the robust consumer demand in the neighbouring markets.
Owing to its exposure to Brazil, Argentine auto exports rose over 33% year-on-year (y-o-y) in the first quarter of 2011, prompting local carmakers to ramp up production by over 28% y-o-y, to nearly 159,500 units, in the same period, according to the Argentine Automobile Manufacturers Association (Adefa) estimates. While we see temporary boost to Argentine production, we remain concerned about a significant increase in the country’s production capacity in the medium and long term. We believe that the amount of new investments is just not enough to significantly step up production volumes. As such, the publisher maintains its production forecast of an annual average growth of 7% y-o-y between 2011 and 2015.
Things look similarly unsustainable for domestic demand. The new vehicles market has already shifted 184,971 units during Q111, 20% more than that in Q110, mostly helped by fewer government cutbacks, ahead of the October 2011 elections and consumers using cars as a hedge against inflation. While this growth poses upside risks to our growth forecast of over 9%, to nearly 764,800 units, in 2011, we adopt a ‘wait and see’ approach until the new government in power undertakes the necessary reforms. Cutbacks will eventually cool consumer enthusiasm, bringing vehicle sales growth down to an average of just over 6.5% y-o-y between 2012 and 2015.
Meanwhile, we remain sceptical about the government’s plan to restrict imports of high-priced luxury cars into the country as a way of keeping a check on its weakening auto trade balance. Premium vehicle manufacturers such as BMW, Audi, Mercedes-Benz, Lexus, Volvo and Porsche are the ones most likely to be affected. BMI believes that a better long-term fix would be to attract more investment to increase the country's auto exports.
Unlike Brazil or Mexico, Argentina has failed to attract any significant autos investment. But its fourth position in our ratings was due to a 43.4% y-o-y growth in the country's auto sales last year. It has pushed up Argentina's score from 55.1 points to 59.7 points. Going forward, however, we see severe downside risks to Argentina's position as the timid growth in country's vehicle production will eventually lower its overall score in the ratings.
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