Market Report, "Argentina Autos Report Q4 2013", published

From: Fast Market Research, Inc.
Published: Thu Sep 19 2013

Over the first six months of 2013, vehicle sales in Argentina increased 16.3% y-o-y, to 462,671 units. This follows large increases over the last three months, which we believe has artificially buoyed the year-to-date figure. For now, we maintain our forecast for a 10% increase in 2013.

Despite this sharp increase, BMI maintains a bearish outlook on vehicle sales growth in the country, predicated on persistently high inflation and unemployment levels depressing consumer sentiment. Currency effects have played a large part in this strong year-to-date growth; we believe that such effects may prove to be unsustainable over the year, however, and expect the sales growth rate to moderate in the coming months.

The majority of vehicles sold in the country are imported owing to the relatively small size of domestic production. Imported cars are priced in dollars, but can be bought in pesos at the official rate; if a buyer pays with pesos bought with dollars on the black market (the implied rate), it will be considerably cheaper. Reports suggest that imports of luxury cars into Argentina have surged in the first four months of 2013, as the country's weak consumer story has little impact on this segment. We believe that this, at least in part, helps explain the recent surge in sales growth.

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We maintain our view that Argentina is unlikely to significantly boost investment from international auto manufacturers and develop into a regional manufacturing hub. Compared to Brazil and Mexico, Argentina exports relatively little to North America. As such, the country is less attractive as a potential production location for international auto manufacturers. Further, Argentina continues to score significantly lower than the regional average in BMI's Risk/Rewards Ratings for the autos industry in the Americas. We believe a significant relaxation in regulations for carmakers and a check on inflation will be required to help Argentina improve its score.

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