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Customer LoginsArgentine light-vehicle registrations grow 15.3% y/y in April 2016 and 5.6% YTD
Argentine light vehicle sales climbed 15.3% year-on-year (y/y) in April 2016, according to dealer organisation ACARA, pushing the year-to-date (YTD) into positive territory despite a double-digit drop in January 2016.
IHS Automotive Perspective
- Significance: Argentine light vehicle registrations gained in April 2016, and are now up 5.6% over the first four months of 2016, according to dealer association ACARA.
- Implications: Argentina has now posted consecutive monthly increases. A trade agreement with Brazil has boosted sales, although continuing market declines there curbed any boost for Argentine exports.
- Outlook: Through April 2016, ACARA's registration results indicate that the market has grown by 5.6%, largely on the strong April result, after a decline in January of 14.8%. IHS has accordingly revised its forecast for Argentina, now predicting 2016 sales will slip 5.2% to 614,809 units, compared with an earlier projection for a 9.7% decline. The setback is forecast to be temporary, with growth forecast from 2017 through 2023.
Argentina's Asociacion de Concesionarios de Automotores de la Republica Argentina (ACARA) has published its figures for April 2016 registrations, with the fourth month of 2016 showing a 15.3% gain. The strong April lifted year-to-date (YTD) results to a 5.6% gain, following a steep decline in January.
Ongoing effects of the peso's depreciation and economic and political instability are holding back the market, which had once looked set to post 1.0 million units this year. Light vehicle registrations in April totalled 57,552 units, with passenger car sales of 41,503 units (72%) and light commercial vehicle sales of 16,049 (28%). Argentine passenger car registrations in the month rose 13.9% (y/y) and LCV registrations 19.2% (y/y), according to ACARA.
In April 2016, and for the quarter, Volkswagen was the market's best selling OEM, despite its registrations sliding 2.0% y/y in the month and 6.6% y/y over the YTD. General Motors' (GM's) registrations climbed 21.1% over the YTD to 34,039 units, although its April sales of 7,912 units were bested by Renault/Nissan and PSA. FCA dropped to seventh in April.
The B-car segment remains by far Argentina's highest volume segment, though its share in light vehicle registrations slipped to 37.5% in April, down from 45.6% in March and 41.5% in the YTD. The C-car segment came next with a 16.7% share of the market in April (up from 13% in the same month of 2015). Among more than 30 entries, the best-selling B-car – in fact, the best selling vehicle overall – was the Chevrolet Corsa Classic, followed by the Volkswagen Gol, Fiat Palio, and Renault Clio. The Chevrolet had nosed ahead of the VW for top sales parent in January 2016, fallen back to second in February, then regained the lead in March. Though Chevrolet topped the list in April, the two are likely to shift positions throughout the year.
Outlook and implications
Through April 2016, ACARA's registration results indicate that the market has grown by 5.6%, largely on the strong April result countering January's decline of 14.8%. IHS has accordingly revised its forecast for Argentina, predicting 2016 sales will slip back 5.2% to 614,809 units, compared with an earlier forecast for a 9.7% decline. The setback is forecast to be temporary, with growth forecast from 2017 through 2023.
IHS is now reporting on monthly Argentine light vehicle market performance using ACARA data. A review of the ADEFA data, which includes production and export figures, will also be issued. Argentine vehicle registrations closed 2015 down 6.0%, with the decrease moderated by gains in the fourth quarter. IHS Automotive sales data, which can differ from registration data presented here, show that Argentina's sales nudged down 0.2% in 2015.
Argentina fared much better than initially expected in 2015. It started off the year with a seasonally adjusted annual rate (SAAR) of sales below 500,000 units, but quickly crept up towards 600,000 approaching the end of the first quarter. In the last quarter of 2015, the SAAR broke the 700,000-unit mark. Exports plummeted given the plunge in Brazilian sales and freed up more foreign currency to make vehicles available to the local market, continuing into 2016. The Argentine peso's exchange rate of ARS8.5:US1.0, along with taxation, strains consumers by making cars even more expensive. This drove the decline in 2014 and held sales flat in 2015. The effects of depreciation are expected to last well beyond the short term.
In February 2016, Argentina and Brazil started talks on a free-trade agreement to replace the current quota system. But as Brazil's economy continues to decline the Argentine government is resisting both a free-trade agreement and automakers' request to allow USD1.8 in imports for every USD1 exported, up from today's USD1.5. The negotiations are partly driven by Brazil's efforts to increase its export base, as its shrinking market has hit its production. The current quota-based system was extended in June 2015 through June 2016. A broader agreement would benefit Brazil more than Argentina, which has less opportunity of increasing its exports of assembled vehicles to Brazil than vice versa. Additionally, a lack of foreign currency has crimped supply by restricting car and component imports. One of the factors improving sales is the government's efforts to free up more foreign currency, to make vehicles available for the local market and cushion the impact of plummeting exports to Brazil. Greater local availability has increased sales.
Argentina updated its tax structure in 2015 to account for inflation and also to hinder imports and dollar flight, as the conversion of dollars to pesos left the government short of dollars in its foreign reserves. The minimum threshold had been raised by 15%, with a 30% tax applied to vehicles priced before tax at ARS195,500–241,500 (USD13,756–16,993). Vehicles below the threshold had been taxed at 10%. A 50% tax applies to vehicles costing more than ARS241,500 before taxes and profit. In 2014, the threshold was ARS170,000, hitting hardest the C, D, and E segments. Pickups are exempt from the tax.
Going into 2016, a new government has again revised the structure. Excise taxes are reduced and tax on cars costing more than ARS350,000 falls from 30% to 10%, while tax on luxury vehicles costing over ARS800,000 drops from 50% to 20%. Implemented in mid-January, the change has had less impact than expected. In 2014, higher taxes and the devaluing peso cut demand to 651,000 units and continuing negative conditions also sapped sales in 2015. A quick recovery is unlikely, with an early decline in the first quarter of 2016 indicative of the year's expected performance.
The YTD SAAR stands at 580,000, with January at 405,000 because the new tax scheme took effect after the first 10 days of sales. Propelled by the currency's devaluation, car prices are up 37% y/y, although this seems not to have distorted the market. IHS assumes the new foreign exchange rate is starting to permeate to cars, but may take through September as inventories are replenished.
About this article
The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.