Argentina Autos Report Q1 2008

Argentina's automotive industry looks set to end the year on a high and forecasts for growth in 2008 are positive. As industry data reveal, vehicle sales, output and exports continued to surge during the first nine months of the year, at times hitting record levels. Industry majors such as Volkswagen (VW) continue to invest in Argentina buoyed by the gains they have already made in the country and keen to tap opportunities for further growth. In keeping with its score on output potential on BMI's Business Environment Ranking, Argentina has emerged as a crucial production base, providing cheaper costs and a key platform for exports across Latin America.

According to data from the Argentine carmakers' association, ADEFA, vehicle sales totalled 416,469 units during the first nine months of 2007. The top three manufacturers, VW, General Motors (GM) and Peugeot Citron all reported significant gains against the same period a year earlier. VW, for example, saw its sales climb by 20.4% year-on-year (y-o-y) to 84,224 units. GM's sales were up by 22.5% y-o-y to 68,436 units, while Peugeot Citron reported sales of 59,652 units, an increase of 25.7% y-o-y. BMI is expected sales for 2007 to come to 543,933 units in line with industry expectations that full-year sales levels will be similar to levels of output. While we expect economic growth to buoy vehicle sales this year and in 2008, an expected slowdown over the forecast period up to 2012 means that the high rates seen this year are unlikely to be repeated.

Output growth has exceeded expectations this year. In September 2007 vehicle production hit 49,875 units, its highest level in the country's history, beating the previous record set in 1998 by some 2,949 units. During the period January-September, output rose by 25.7% against the same period a year earlier, leading industry representatives to predict that total production would surpass 500,000 units in 2007.

BMI raised its 2007 production forecast to 532,780 units as a result of this.

By carmakers, GM emerged as the biggest vehicle producer for the period January-September. According to data from ADEFA, GM made 80,039 units during the nine-month period, a massive 71.6% increase on the same period a year before. Peugeot Citron came second in the overall rankings, turning out 75,325 units, a 10.5% y-o-y increase. Output for third-ranked Ford was up by 15.1% y-o-y to 63,337 units.

As mentioned above, Argentina's automotive sector continues to attract significant investment from industry majors. This proved the case again in H207 with VW earmarking investment of EUR223mn (US$316.7mn) for its plant in General Pacheco. According to company sources, VW will use the capital to manufacture a new pick-up truck that has been earmarked for sale in Argentina and for export. The investment is VW's biggest in Argentina to date, say company sources. Output at the plant will reach 90,000 units, with the addition of a third shift. Production of the new vehicle is scheduled to commence in 2009.