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Customer LoginsMexican sales jump 24.9% y/y in April as production and exports continue to slip
The Mexican automotive industry's April results continue the trend of the first quarter, with light-vehicle sales surging a further 24.9% y/y, although a 15.6% slide in exports spurred a 4.9% y/y decline in production.
IHS Automotive Perspective
- Significance: Mexico's light-vehicle market continues to post strong gains thanks to favourable macro-economic conditions. A 24.9% year-on-year (y/y) sales gain in April contributed to a 16.2% y/y improvement over the first four months of 2016. But production so far this year is down 5.0% y/y and exports have fallen 7.4% y/y.
- Implications: A positive local demand trend has failed to offset a dip in exports, which dominate Mexico's production landscape, as South American markets stayed weak. Mexico's strongest export market remains the US, where nearly 76% of output was shipped through April 2016. The US is followed by Canada, which has taken 10% of Mexico's production so far in 2016.
- Outlook: IHS Automotive has adjusted its forecast for 2016 on the strong first-quarter results, now projecting sales this year will climb 8.07% y/y to 1.46 million units. Continuing investment in production facilities will help Mexican output grow steadily and strongly over the coming years, despite headwinds from shrinking South American export markets.
Mexico's light-vehicle sales continued to surge at double-digit percentage rates in April. Sales soared 24.9% year on year (y/y) to 118,407 units in the month, according to latest data from the Mexican Automotive Industry Association (Asociación Mexicana de La Industria Automotriz: AMIA). Over the first four months of 2016, sales have improved 16.2% y/y to 465,733 units. The market expanded 19.1% in 2015 to 1.35 million units, with passenger car sales up 19.7% to 892,194 units and light commercial vehicle (LCV) sales up 17.8% to 459,454. Sales growth in 2015 in Mexico differed from the trends in other global regions, in that demand grew faster for passenger cars than LCVs. IHS forecasts sales growth of 8.07% in 2016, with cars providing 65% of sales and LCVs 35%.
Nissan (including Infiniti) maintained its position as the best-selling group in Mexico, with sales in April of 28,750 Nissan units (up 17.0% y/y) and 165 Infiniti units (up 29.9% y/y). GM took second position with 22,930 units sold (up 23.2%) and also kept ahead of Volkswagen (VW) in the year to date (YTD). Including Audi, SEAT, and Porsche, VW sold 19,593 units in April (up 34.3%). Toyota sprang to fourth place, with 7,729 units (up 41.9% y/y). Fifth place belonged to Ford, with 7,524 Ford-branded units (up 8.8%) and 194 Lincolns (up 59.0%). Fiat Chrysler Automobiles (FCA) dropped to sixth with 7,321 units (down 2.0% y/y).
Mexico's output slipped 4.9% y/y in April to 269,604 units, down from 283,392 in April 2015, as GM, FCA, Ford, and Mazda all reported lower output. Through April 2016, production declined 5.0% to 1,075,340 units. Nissan remains Mexico's most significant contributor and its YTD output rose 4.6% y/y to 282,596 units. Second-placed GM's YTD output fell 8.7% to 203,804 units. Ford's output also declined in the YTD, down 4.6% y/y to 145,943 units while FCA's slumped 25.5% y/y to 125,897. VW's YTD production dropped 18.5% to 131,687 units and Mazda's slipped 22.7% to 51,877. Toyota and Honda led in terms of percentage gains. Toyota reported a 77.7% surge to 46,829 units and Honda registered a 38.9% y/y gain to 86,707.
Mexican light-vehicle exports also slipped 7.4% y/y throughout the year, with the April figure down 15.6% y/y. Lower exports sapped output for producers including FCA, GM, FCA, Mazda, and VW. GM exports were down 10.4% y/y in the YTD to 157,343, while VW's shipments dropped 30.7% to 94,362. Brazil's economic woes continue to weigh on export numbers, despite strong demand from the US and Canada. Over the first four months of 2016, Mexico exported 15,720 fewer units to Brazil than in the same period of 2015.
Outlook and implications
Largely through increased access to credit and improved consumer confidence, the Mexican light-vehicle market has returned to pre-crisis levels, which totalled more than 1 million units per annum (upa) between 2004 and 2008. With double-digit increases in many months, sales grew 19.1% y/y in 2015 and have kicked off 2016 with a strong 16.2% y/y rise over the first four months, driven by solid gains each month. April was no exception, with sales up 24.9%. IHS expects that conditions will continue to improve and that moderate sales growth will ultimately become the trend. Our forecast for 2016 is an increase of 8.01% with growth in subsequent years of 1−2%.
The AMIA notes that the Banco de Mexico, the central bank, in April 2016 projected economic growth of 2.41% in 2016 and 2.86% in 2017, adjusted downward from earlier forecasts of 2.69% in 2016 and 3.18% in 2017. Inflation is now expected at 3.19% in 2016 and 3.35% in 2017, revised down from 3.30% in 2016 and 3.41% predicted earlier. According to the AMIA, the economy faces international financial instability and weakness in the external market and the global economy. As Mexico's fortunes tend to track those of the neighbouring United States, the current stuttering economic indicators north of the border will need to be watched closely. The AMIA also reports that the fifth component of the consumer confidence index, which measures the likelihood of purchasing durable goods, increased in April by 1.6% y/y to 84.0 points, which is still 21.6% below April in pre-recession 2007. A supplemental index of the possibility of buying a car has risen to 66.1 points, 4.4% higher than in April 2015.
The AMIA reported that used-car imports are continuing to decline, which is a factor in our sales forecast. The slowdown of imported used cars since 2014 has helped provide some breathing room for new cars. In 2015, imports of used cars slumped 60.6%, the AMIA reported, noting that this was the lowest volume since 2005. But imports climbed in February by 25.8% y/y and in March by 34.8% y/y. The association continues to note that 7.75 million used vehicles in the country will have implications for 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 maintain current practices.
Investments by automakers and component suppliers continue. In early April 2016, Ford announced plans for a new USD1.6 billion small car plant. There is a slight hiccup with a new Kia plant, as the state government of Nuevo Leon looks to renegotiate an aid package awarded to Kia ahead of construction, although there are reports production may start in the middle of May 2016. After climbing 9.9% to 3.21 million units in 2014, Mexican light-vehicle production growth moderated in 2015, rising 5.7% to 3.39 million units. As new plants come online in 2016 and 2017, however, Mexico's output is predicted to rise to 4.61 million units in 2018 and more than 5.0 million in 2024. Mexico's production eclipsed Brazil's in 2014 and is expected to remain ahead throughout the forecast period, in part due to slowing markets in Brazil and Argentina.
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.