THE AUTOMOTIVE RESOURCE GUIDE

An Expert's View about Automobile in Argentina

Posted on: 27 Dec 2011

SUMMARY

Argentina has a well developed automotive industry that started in the early1950’s with nine firms producing automobiles and trucks of European design. The automotive import market is pretty much restricted due to an Automotive Industry Cooperation Agreement with Brazil which allows for the integration of bi-national production and severely limits imports of automobiles, trucks and parts from third countries. The restriction is even stricter on used vehicles and parts: there is an outright prohibition. Local production of vehicles exceeded 800,000 during 2011 of which 81 percent were exported to Brazil and other Latin American countries. The nine local manufacturers and their respective market shares, in ranking order, are General Motors Argentina 18 percent; Peugeot-Citroen 18 percent; Ford Argentina 13 percent; FIAT also 13 percent; Renault Argentina 12 percent; Volkswagen Argentina 11 percent; Toyota Argentina 10 percent; Mercedes-Benz Argentina 2 percent and Iveco 1 percent.

MARKET DEMAND

ADEFA, the local automobile manufacturers’ Association, estimated the total the total number of vehicles at 7.1 million for 2010, of which 4.8 million were cars and station wagons and 1.7 million were light commercial vehicles and minibuses. At least 50 percent are over eight years old and one third run on compressed natural gas (CNG), which is significantly less costly than gasoline. New vehicle sales have been growing steadily since 2003, and from 2010 to 2011 the growth reached 39 percent.

It is important to note that automobiles in Argentina are significantly more expensive than in the U.S. in absolute terms. If one compares the number of salaries that a blue collar worker needs to purchase a similar car, the ratio is even more dramatic: an Argentine worker needs 15 monthly salaries to afford a subcompact, while in the U.S. it is five. There are other factors to consider in order to understand the peculiarities of the Argentine market for automotive: it’s a country of 40 million inhabitants where: a) leasing is not available; 2) Argentina has one of the highest traffic accident rates in the world and 3) there is significant car theft. This translates into very high insurance costs, which average ten percent of the value of the vehicle, annually. For the vast majority of the population, owning a car is a costly investment and one that entails a significant portion of disposable income. This greatly limits the possibilities of many segments of the population to indulge in accessories or performance equipment.

It is important to bear in mind that Brazilian imports enter Argentina free of duties because of the MERCOSUR customs agreement. This competitive advantage places Brazil as Argentina’s second largest supplier.

Regarding the market for parts in general, the average vehicle lifespan in Argentina ranges from 10 to 15 years. Low-end buyers strongly favor third party rather than OEM products. Therefore Asian suppliers dominate the market for replacement parts. Aftermarket parts imports consist, primarily, of low cost Asian imports. High quality hoses, belts, filters, batteries, light bulbs, brake pads, a/c compressors, air bag systems and other electronic are sourced from the U.S. and Europe.

Overwhelmingly, Argentines prefer manual transmissions, which account for more than 85 percent of cars sold. As for engine size, 85 percent of cars in Argentina have a cylinder capacity between 1.2 and 2 liters. But this is changing gradually. Although small cars remain the most popular type of car in Argentina representing 70 percent of all new registrations in 2011, the appeal of larger-sized mini-vans is also increasing. There are only a few late model U.S. vehicles on the roads in Argentina. Some models however, such as the Jeep, sell relatively well in this market. Typically, the types of cars purchased in Argentina contrast sharply with the models popular in the U.S. Of the 4.8 million cars on the road today, 85 percent are of European design, Japan 5 percent and Korea 4 percent.

Only five percent of all auto parts imported into Argentina originate in the United States. Brazil is the main supplier with a 46 percent market share. The rest are: EU, 20 percent, South East Asia 14 percent, Japan 3.2 percent and other Latin American countries, 3.2 percent.

Argentine manufacturers supply a wide range of automotive parts, namely: Stamped metal body parts, plastic parts and insulation, headlamps, glasses, water pumps, steel wheels, cable assemblies, engine components (crankshafts, connecting rods, valves), batteries, rear axles, oil pumps, drum brakes, coils and suspension components, 0ther (lamps, mirrors, electric window components)
 


Posted: 27 December 2011