2013-02-24 15:33:53 - Recently published research from Business Monitor International, "Venezuela Autos Report Q1 2013", is now available at Fast Market Research
Vehicle sales in Venezuela increased 11.2% year-on-year (y-o-y) in the first nine months of 2012. However, sales declined 12.7% y-o-y in September, a considerable slowdown from the 28.9% y-o-y rise in the first four months of 2012. BMI has long maintained sales would drop back in line with our 10.8% growth forecast for 2012, and this view is continuing to play out. BMI believes the relatively buoyant vehicle sales in the first part of the year were down to the credit-fuelled consumption increase, combined with favourable low base effects. The unwinding of this, combined with the expected devaluation of the bolivar, will serve to bring vehicle sales down in line with our forecast this year.
Venezuelan vehicle production in the first
nine months of 2012 registered a y-o-y increase of 5%, to 83,790 units. Despite strong growth in the beginning of the year, the sector has become more subdued in recent months. In September, vehicle production declined 21% y-o-y, to 8,038 units. In light of ongoing declines in production and the weak regulatory and industrial environment, we recently revised our forecast to a more bearish 3% increase over the year, from a 10.4% increase previously. Vehicle production in Venezuela was given a boost in 2012 due to close ties between the government and China. In February, Chinese automaker Chery opened four dealerships in the country, and has revealed plans to open 14 more. BMI believes that, without the government-aided investment of Chinese manufacturers, production figures would continue their historic decline due to the lack of changes in the regulatory environment.
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Our core outlook for the segment currently forecasts vehicle production reaching 140,909 units by 2016, still a far cry from over 172,000 units produced in 2007, prior to the imposition of import restrictions. Given that growth in domestic sales in directly related with dynamics in the production segment, we forecast vehicle sales to reach 198,500 units by the end of 2016 forecast period. This is still far below the 492,000 units peak reached in 2007.
There is some cause for optimism on the back of ongoing investment from Chinese, Russian, and Iranian auto manufacturers, although exact sales and production figures are difficult to find and verify. Indeed, BMI warns of being overly optimistic about these developments due to potential volatility in the balance. In February 2012, for example, Venezuelan president Hugo Chavez revealed that international sanctions imposed on Iran are hurting Venirauto, of which 64% is owned by the Venezuelan government and 36% by Iran's Aidco. Chavez's acknowledgement of Venirauto's difficulties undermines one of the potential boosters for the Venezuelan autos production segment. Venirauto was to be part of the government's drive to form a large state-run automotive corporation and was to be involved in the entire production chain by engaging in a range of activities from the handling of raw materials to the distribution of finished products.
Venezuela remains our least favourite market in the Latin America region. The government is doing little to improve the operating environment for carmakers and there could be more downside risks, given that there are discrepancies between government policy and the experiences of carmakers themselves. Much will depend on whether carmakers have been able to significantly improve their production levels in line with the increased demand. We expect Venezuela's regional underperformance to continue as long as the policy of import restrictions remains in place.
It should be noted that all Venezuelan vehicle sales and production data comes from Automobile Industry Chamber of Venezuela, Cavenez. This is the only source of vehicle sales and production data for the country. The sales figures reported by the organisation represent only the total car sales for dealers registered to it (Fiat, Mini, BMW, Honda Motor, Kia Motors, Nissan Motor, Mazda Motor, Renault, Scania, SEAT, Volkswagen and minor imports of other brands). The production figures reported by the organisation represent only the total number of cars produced in Venezuela by factories of manufacturers associated to Cavenez (Daimler, Ford Motor, General Motors Company, Iveco, Mack, MMC Automotriz and Toyota Motor). Therefore, the sales and production figures appear to overlook the sales figures of a number of important companies operating in Venezuela, including Russian manufacturer AvtoVAZ, and China's Chery International, among others. All trends in historical data, and BMI's forecasts for future trends in vehicle sales and production, are based on this limited picture of the industry. Attempts to garnish a fuller picture of the Venezuelan automotives sector are ongoing.
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