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Argentina Autos Report Q1 2012
Business Monitor International, Nov 2011, Pages: 54
Business Monitor International's 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.
Argentina has managed to overtake Mexico in BMI’s Risk-Reward Ratings for the autos industry in the Americas this quarter, primarily on the back of continued robust demand from Brazil and equally impressive domestic vehicle sales. Argentina's autos association Adefa estimates that a 22.3% year-onyear (y-o-y) rise in vehicle exports during the first nine months of 2011 led to 23.2% y-o-y growth in vehicle production in the period. The market shifted 28.5% more cars during the nine-month period while sales of commercial vehicle were up almost 41%.
BMI are cautious that the country may not be able to maintain this position as Brazil seeks to protect local manufacturers with import restrictions and as domestic demand begins to weaken.
In total, BMI expect 15% growth in Argentine production to be followed by average growth of 8% y-o-y between 2012 and 2016. The momentum in domestic demand will be checked by cuts in government spending, prompting us to forecast average sales growth of just over 6.5% y-o-y between 2012 and 2016.
There are significant upside risks to these forecasts. BMI believe that the signing of the trade agreement between Mexico and Mercosur could help Argentina boost production competitiveness and help in the creation of an integrated autos production hub. The country has long been struggling to diversify its supplier base, which has often been a damper on new autos investment in the country.
Investments from international carmakers, while small, are encouraging. As recently as August 2011, France's PSA Peugeot Citroën strengthened its commitment towards production in Argentina by announcing plans to spend an average of ARS300mn each year and add two new models to its plants in the country. The announcement came a month after China's Chery Automobile revealed its plans to establish a new assembly plant in Argentina in partnership with locally based Socma Group.
There was optimism also in the motorcycles and the suppliers segments. In August 2011, Japan's Honda Motor revealed it is looking to invest nearly US$3mn into motorcycle production in Argentina as it seeks to reduce its presence in Brazil and make Argentina a strategic base for motorcycle exports to the rest of the Americas. In October 2011, Pirelli revealed it will spend a total of US$500mn on expanding its truck tyre production in Argentina by 2014. These investments also bode well for the government's plan to reduce the trade deficit in the autos sector, but a lot more needs to be done if Argentina is to catch up with its regional peers.
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