Recently released market study: Venezuela Autos Report Q3 2013

Vehicle sales in Venezuela declined 22.9% y-o-y in the first quarter of 2013, to 25,639 units. On the back of these ongoing declines in sales volumes and an increasingly bearish macro picture, we forecast a decline of 25% in 2013. The country's weak consumer story could have a stronger impact on sales, however, and we caution that the risks to our sales forecast are firmly to the downside.

The macro picture in Venezuela is increasingly bearish, and we believe that this will continue to impact sales over the year. The government's recent currency devaluation will pose a considerable upside risk to inflation, hike interest rates for vehicle loans, and make vehicle imports more expensive, thus eroding consumers' purchasing power and affecting sales volumes.

In Q113, sales of domestically-produced vehicles declined 50.5% y-o-y, to 13,763 units, while sales of imported vehicles increased 118.9% y-o-y, to 11,876 units. This increase in imported vehicles is due to the paucity of domestically-produced cars and low-base effects.

Full Report Details at
- http://www.fastmr.com/prod/607213_venezuela_autos_report_q3_2013.aspx?afid=301

BMI has become increasingly bearish on vehicle production in Venezuela. We believe that the government will continue to intervene in economic activity throughout 2013, further restricting access to foreign currency and implementing import restrictions on vehicle components. Further, the recent currency devaluation will serve to make supplier imports more expensive, exacerbating shortages of components.

Vehicle production in Venezuela decreased 51.1% y-o-y in Q113, to 14,316 units, as these dynamics continued to play out. We forecast a decline of 45% in 2013.

BMI has long maintained that in order to see sustained growth in vehicle production, the regulatory environment needs a complete overhaul, particularly in the issuance of assembly permits and access to foreign currency. This does not look likely, however, and Venezuela continues to rank below the regional average on BMI's Risk/Reward Ratings.

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