Venezuela Autos Report Q2 2008

Venezuela's decision to limit the number of vehicle imports entering the country has had an almost immediate effect on the new car market. As BMI reflects in the latest Venezuela Automotives Report, sales of locally-produced vehicles rose significantly during the first two months of 2008, while imports fell. The Venezuelan government continues to increase its hold on the automotive industry, which has had a knock-on effect not only on the domestic market, but also abroad in countries such as Colombia.

In H207, the Venezuelan government approved legislation limiting the number of vehicle imports to 219,000 units. This stance was adopted to boost local vehicle production. In line with government estimates, for every two cars produced in Venezuela, only one will be imported. Imports soared in Venezuela's new car market in keeping with soaring demand, which at times led to waiting times for vehicles of up to four months.

According to data from the Venezuelan automotive industry association, CAVENEZ, sales of locally produced vehicles rose by 71.4% in February 2008 against the same month a year ago. Total sales amounted to 28,246 units in February, of which 12,922 units were made in Venezuela. Imports totalled 15,324 units, down by around 27% year-on-year (y-o-y). A significant difference also occurred between sales reported for January and February 2008. According to the February data from Cavenez, sales of nationally-produced vehicles were up by a significant 107.2% on the previous month. Similarly, imports in February fell by 29.4% compared to January.

As mentioned above, the restrictions placed on vehicle imports are affecting Colombia's automotive sector. For example, market leader General Motors (GM) has put its recruitment plans in the neighbouring country on hold. According to industry sources, GM's operations in the Andean region are expected to export only 8,500 units to Venezuela this year, a significant decrease on the previously forecast 17,400 units. Indeed, the new legislation has affected Venezuela's standing in BMI's new Business Environment Ratings Index, precisely because of its harmful effect on other markets in the region.

Other developments this quarter include the announcement by the Venezuelan government that a new 100%-Venezuelan model will be unveiled in 2008, which in turn is expected to boost local vehicle production.