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Venezuela Autos Report Q4 2009
Market |
Automotive and Parts |
Report Type |
Market Research |
Country |
Venezuela |
Published |
27 August 2009 |
Number of Pages |
45 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
Production shutdowns could limit Venezuela’s total auto production at 98,900 in 2009
The Venezuelan government’s intervention in the domestic auto industry has created havoc for both vehicle sales and production this year. The report finds in this Q409 Venezuela Autos Report that the introduction of price controls on vehicles could further add to these woes and, in fact, go on to distort market demand and supply in Venezuela.
The market demand has already been constrained by the ongoing import restrictions on vehicles, resulting in locally-based carmakers reducing production by 15.3% year-on-year (y-o-y) to 62,755 units in H109.
This resulted in a short-supply of cars and longer waiting times, thereby fuelling demand for used vehicles in the market. In total, only 81,131 units were sold during H109, 57.5% fewer than in the same period in the previous year.
In theory, shortage in supply leads to an increase in the price of vehicles, and in Venezuela, vehicle prices have been reported to be nearly three times higher than those of equivalent models in the US or Europe.
This prompted the government to approve a bill that proposes vehicle prices to be based on the production cost, taxes, foreign exchange rate and fixed profit margin. The government believes that such a control will help put a cap on the maximum price that carmakers and dealers can put on a vehicle.
It is believed that the new regulation is unlikely to be welcomed by carmakers in the country, most of whom have already been facing losses due to a shortage in the supply of US dollars allocated by the government for vehicle parts import. This has prompted the market leader, General Motors, to suspend production for three months, starting from June. The report forecasts that such shutdowns could limit Venezuela’s total auto production at 98,900 units this year, down from 135,042 units produced in 2008.
With increasing regulation, we do not expect much growth in 2010, when production could fall further to 97,900 units.
Meanwhile, the domestic demand will be affected by the deep and prolonged recession in the economy.
Indeed, the recession will be even more prolonged, as we expect a 5.6% contraction in economic activity this year. This could take vehicle sales down by nearly 33% y-o-y in 2009, to be followed by a further fall of 6% y-o-y in 2010.
The difficult operating environment has also resulted in Venezuela losing its position of fifth (it has moved down to sixth) in the Business Environment rankings for the autos industry in America. With a 3.1 point fall in its score, Venezuela now lies much lower than the other key Latin American markets of Brazil, Mexico, Argentina and Chile. We believe that its regulatory environment may, indeed, prove to be a major deterrent to new investments into the country going forward.
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