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Customer LoginsJuly Mexican light-vehicle market sales rise 17.9% y/y and exports slip
July results continue trend of the prior months, with light-vehicle sales surging a further 17.9% y/y in July, though exports slipped 0.4%. While production is down year to date, July saw an increase in output.
IHS Automotive perspective
- Significance: Mexico's light-vehicle market continues to post strong gains thanks to favourable macro-economic conditions. July sales grew by 17.9%, slower than May's 19.2% or April's 24.9% sales gain, yet contributing to an 18.3% gain over the first seven months of 2016. Production so far this year is down 1.2% and exports are down 4.8%.
- Implications: Positive local demand has failed to offset a slip in the exports, leading to a production decline - though the decline is moderated somewhat on July results. Export declines are largely the result of the struggling markets of South America. The strongest export market for Mexico remains the US, followed by Canada.
- Outlook: IHS Automotive has adjusted its forecast for 2016 on the strong first quarter results, now projecting sales this year will reach 1.509 million units and growth of 11.6%. Continuing investment in production facilities will help Mexican output grow steadily over the coming years, despite the headwinds faced from the shrinking South American export markets.
For seven months in 2016, Mexico's light-vehicle sales have surged at double-digit percentage rates. In July, sales grew 17.9% year over year (y/y), according to latest data from the Mexican Automotive Industry Association (Asociación Mexicana de La Industria Automotriz: AMIA). Through July 2016, sales have increased 18.3% y/y to 853,620 units; July sales came in at 131,764 units. The market grew 19.1% in 2015, reaching sales of 1.35 million units, split by passenger cars, up 19.7% to 892,194 units, and light commercial vehicles (LCVs), which rose 17.8% to 459,454 units. Sales growth in Mexico is different from the trends in other global regions, in that passenger-car demand increased at a higher pace than LCV demand in 2015. IHS Markit has increased its forecast to sales growth of 11.6% in 2016, up from 8.1% earlier, and for a full-year total of 1.509 million units; we forecast the sales split between LCV and passenger cars in 2016 will favour passenger cars, at 64% versus 36% LCVs.
Nissan (including Infiniti) maintained its position as the best-selling group in Mexico, with sales of 33,201 Nissan and 186 Infiniti units, a 16.3% y/y gain for Nissan and 36.8% gain for Infiniti. GM, under the Chevrolet badge, kept its position as second-largest seller, with 21,272 units sold and a gain of 18.3%; GM remains ahead of VW year to date (YTD). Volkswagen (VW; including Audi, SEAT, and Porsche) sold 21,130 units in July 2016, an increase of 16.9%. FCA pulled back up to third position, with 9,009 units sold - a decline of 15.5%. Fourth place belonged to Ford, with 7,248 Ford-branded units, up 15.2%, and 149 Lincolns, up more than 200%, in July. Toyota held to fifth place, with 5,969 units sold and a 38.8% gain.
Mexico's output gained 11.8% y/y in July 2016 to 284,398 units, from 254,312 units in July 2015. Year to date, production has slipped 1.2 % to 1,958,368 units. Nissan easily remains Mexico's most significant contributor and output rose 3.6% y/y so far this year, to 489,802 units, while second-placed GM's output is down 4.1% to 374,673 units January through to July 2016. Ford's output is also down 9.5% year to date, to 244,258 units, and FCA slumped 12.9% y/y to 255,333 units. Mazda is down 22.1% year to date, to 91,782 units, while VW's production has dropped 11.8% to 247,902 units. While Toyota reported a 16.7% decline, Honda output picked up 12.6%.
Mexican light-vehicle exports are down 4.8% y/y throughout the year, with a July export decline of only 0.4%. In July, declines in exports were from Ford, GM, Honda, Mazda, Nissan, Toyota, and VW plants; for the full year, FCA, Ford, GM, Mazda, Nissan, and Toyota have also seen exports decline. GM exports are down 6.1% YTD to 239,158 January through to July 2016, while VW shipped only 191,731 cars, down 23.8%. Brazil's economic woes continue to drag on total export numbers, despite strong demand from the US; over the first seven months of 2016, Mexico exported 22,783 fewer units to Brazil than the same period of 2015.
Outlook and implications
The Mexican light-vehicle market has returned to pre-crisis levels, which stood at over 1 million units per annum (upa) between 2004 and 2008, largely by increased access to credit and improved consumer confidence, and the market is largely considered business as usual. With double-digit increases in many months, sales increased 19.1% in 2015 and have kicked off 2016 with a strong 18.3% sales increase over the first seven months, driven by solid gains each month. July was no exception to strength, as sales climbed 17.9%. IHS Markit forecasts that conditions will continue to improve. While more moderate growth will become the trend, the forecast for 2016 has been increased to a gain of 11.6%, to 1.509 million units, followed by growth through 2021 between 6.7% and 1.2%. Production increased 11.8% in July, but is down 1.2% for the year; exports are seeing some softness, with flat July results and a 4.8% decline YTD.
The AMIA notes that the Banco de Mexico, the central bank, in May 2016 indicated an expectation of economic growth of 2.28% for 2016 and 2.62% for 2017, compared with May's projection for 2.44% in 2016 and 2.84% in 2017. Inflation is now expected at 3.19% in 2016 and 3.41% in 2017, revised from 3.30% in 2016 and 3.41% in 2017 forecast earlier in 2016. According to the AMIA, the economy continues to see the same possible headwinds: weakness of the external market and the global economy, and international financial instability. As Mexico's fortunes tend to mirror those of its neighbour, the US, the stuttering economic indicators north of the border will need to be watched closely. AMIA also reported in April that the fifth component of the consumer confidence index, which measures the likelihood of purchase of durable goods, increased by 1.6% compared with a year earlier, at 84.0 points; this is still 21.6% below April 2007, before the recession. A supplemental index of the possibility of buying a car increased to 66.1 points in April, 4.4% higher than in April 2015 - these figures were not reported for July.
The AMIA reported that used-car imports continue to remain low, which is a factor in our sales forecast. The slowdown of imported used cars in 2014 and 2015 helped provide some breathing room for new cars. In 2015, imports of used cars fell by 60.6%, the AMIA reported, noting that this was the lowest volume since 2005. Over the first quarter of 2016 used car imports gained by 17.1%, to 61,587 units, followed by y/y declines in May and June. Over the first six months of 2016, used car imports are up 4.0%, to 86,768 units. This figure, however, remains notably lower than the 273,256 used cars imported over the first half of 2015. This change is helping to keep the negative pressures on the domestic market down. The association continues to note that more than 7.75 million used vehicles in the country will have implications on the environment, road safety, and the renewal of vehicles. The AMIA remains concerned that the influx of used vehicles from the US affects the renewal of the vehicle parc, and encourages the Mexican government to keep the current practices in place.
Investments by automakers and component suppliers continue. In July, Michelin confirmed investment into a new plant, Inteva started construction on a plant and ThyssenKrupp confirmed its Mexico investment is on track and BMW broke ground on its new plant. Ford announced in April 2016 its new USD1.6-billion small car plant. Production began in May 2016 at Kia's plant and Audi is on schedule for a September 2016 production star. GM has also started supplemental production of the Cruze in Mexico. After increasing 9.9% to 3.21 million units in 2014, Mexican light-vehicle production growth was more moderate in 2015, reaching 3.39 million units, up 5.7%. However, as new plants come online in 2016 and 2017, Mexico's output is forecast to reach 4.40 million units in 2018, passing 5.0 million units in 2024. Mexico's production eclipsed Brazil's in 2014 and is forecast to remain ahead throughout the forecast period.
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.