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Venezuela Autos Report Q1 2012
Business Monitor International, Nov 2011, Pages: 44
Business Monitor International's Venezuela Autos Report provides industry professionals and strategists, corporate analysts, auto associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Venezuela's automotive industry.
A 3% year-on-year (y-o-y) fall in Venezuelan vehicle production during the first nine months of 2011 comes on the back of four consecutive years of declines in domestic production and have dashed BMI’s expectations of a return to positive growth in 2011. In view of the fact that the government is doing little to improve the operating environment for carmakers, BMI has downgraded its 2011 production forecast to a more than 2% contraction in 2011 while keeping its 2012 growth forecast of 8.5% intact.
In line with its long-held view that a lack of vehicles, and not a lack of demand, will be the key factor responsible for poor vehicle sales in Venezuela, it has also downgraded its sales forecast to a 4% y-oy decline in 2011. Estimates from the Venezuela Automobile Chamber of Commerce (Cavenez) show that although vehicle imports grew 22% during the nine-month period, demand for domestically produced vehicles fell 7.4% y-o-y during the period.
The magnitude of problems facing locally based carmakers can be gauged from the fact that, with the exception of MMC Automotoriz, all of them suffered declines in their domestic production. Toyota Motor was the worst hit, with its 9M11 production down almost 40% at 7,456 units, as labour disputes crippled its operations during July and August. This is in addition to the usual operational problems such as delays in issuing import permits and the scarce allocation of foreign exchange, which significantly limit parts purchases by carmakers.
Such is the pressure on vehicle supply that there has been the creation of a ‘parallel market’ with exorbitant vehicle prices and malpractices on the part of assemblers and dealers. In September 2011, the Venezuelan Ministry of Science, Technology and Intermediate Industries accordingly decided to regulate the prices of new cars at local dealerships in a bid to curb vehicle price speculation. BMI believes that the policy will do little to improve domestic vehicle sales as long as the import restrictions remain in place and production continues to suffer from a poor operating environment. BMI sees little hope for a recovery in the Venezuelan autos market.
Given that the government is maintaining its policy of restricting imports and as production shows no sign of picking up, BMI is limiting its 2012 vehicle sales forecast to a modest 6.0% y-o-y. On a brighter note, India's Tata Motors in August 2011 revealed it is in talks with Venezuela-based MMC Automotriz to potentially begin assembly of its vehicles in the country, the Venezuelan Chamber of Commerce for Auto Parts (CANIDRA) has revealed.
While BMI sees the announcement as a highly positive development for the Venezuelan autos industry, it does little to bolster its confidence in the industry. Labour disputes at Toyota Motor's operations, starting on July 28, have renewed BMI's fears about the difficult operating environment for businesses in the country.
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