Argentine light-vehicle registrations increased 4.7% year on year (y/y) to 61,731 units in April, according to the country's ACARA dealer organisation. The month's performance brings the year-to-date gain down to 32.9% y/y. IHS Markit forecasts full-year growth of 10.4% y/y.
IHS Markit Perspective:
- Significance: April 2017 registrations in Argentina grew at a 4.7% year-on-year (y/y) pace, with passenger-car sales continuing to outpace LCV sales. The van and MPV segments were also weak, posting a combined 9% y/y decline.
- Implications: Following a very strong first quarter, Argentina's sales increased in April by only a single digit, cutting the year-to-date (YTD) gain to 32.9% y/y, down from an increase of 43.4% at the end of March. After the last several months of 2016 delivered double-digit growth, the strong pace in the first quarter was not expected to persist. The first quarter's gain, in fact, reflected poor conditions in the first months of 2016 rather than the likely course for 2017 as a whole.
- Outlook: ACARA's registration results for 2016 indicate that the market grew by 10.8%, above expectations but far from the 43.4% surge in first quarter of 2017. For 2017, IHS Markit forecasts growth of 10.4% as automakers push sales in Argentina to offset Brazil declines. That performance is forecast to be followed by decreases of less than 2% from 2018 through 2020 before sales return to a growth trajectory in 2021.
Argentina's Asociacion de Concesionarios de Automotores de la Republica Argentina (ACARA) has published its registration figures for April, showing a much smaller increase than in earlier months of the year. In April 2017, the Argentine market gained 4.7% year on year (y/y), with the year-to-date (YTD) figure up 32.9% y/y. After 2016 delivered strong sales, the first three months of 2017 posted high increases. But this surge reflected the weak first quarter in 2016, including a 10-day period in January without any registrations. Sales are also typically strong in the first part of the year, with January typically accounting for about 13% of annual sales. Argentine monthly results were volatile in 2016 and may be similarly variable in 2017. The April 2017 single-digit growth is reflective of this.
Registrations in April of light commercial vehicles (LCVs) grew 3.3% y/y while car registrations expanded 5.2% y/y. The Argentine market continues to be driven by passenger cars, which contributed 72.3% in April 2017, up from 71.9% a year earlier. In April's 61,731 registrations, cars made up 44,643 and LCVs 17,088.
The B-car segment remains by far the highest-volume segment in Argentina, making up 35.5% of light-vehicle registrations in April 2017, down from 37.6% a year earlier. The best-seller in the B-car segment in 2016 was the Fiat Palio. But the Volkswagen (VW) Gol has now taken the lead, followed by the Renault Sandero, Chevrolet Onix, and Fiat Palio. The Renault Sandero had topped the list in January. The C-car segment took a 12.5% share in April with 7,696 registrations, lagging B-car sales by more than 14,000. The segment in April declined 6.6% y/y but in the YTD is up 30.4% y/y. Exclusive of segment, the VW Gol held the top sales position in April 2017, followed by the Renault Sandero and Ford Ka.
Argentina's market remains heavily biased towards passenger cars, though sport utility vehicle (SUV) registrations are making inroads. SUV registrations in 2016 jumped 121% y/y. SUV sales in April grew 38.8% y/y and in the YTD are up 99% y/y. B-SUVs are the largest SUV segment, with 4,877 units sold in April 2017. Ford's EcoSport, updated in late 2016, led in April 2017, despite a 31% y/y sales decline, followed by the Honda HR-V, Chevrolet Tracker, and Renault Captur. C-SUV sales totalled 3,431 units in April 2017, ahead of the C Van segment, which it lags in the YTD. The Renault Duster remains the best-selling C-SUV in Argentina, with registrations of 2,376 units in April 2017. Growth in SUV sales is partly at expense of van and MPV segments. C-Van sales slipped 16.4% y/y in April 2017. The B-MPV segment continues to improve.
Volkswagen (VW) maintained full-year leadership in 2016 and holds the lead in 2017, with sales in the YTD up 32.2% y/y and in April up 7.8% y/y to 11,259 units. Renault/Nissan's registrations outpaced VW's from June to December 2016. Since January, though, VW has widened its lead over Renault-Nissan, achieving a gap in April of about 7,000 units. General Motors took third place in April 2017, followed by Ford and FCA. Groupe PSA briefly held fourth place in February 2017.
Outlook and implications
ACARA's registration results indicate that the market grew in 2016 by 10.8%, above expectations but far from the 43.4% y/y gain in the first quarter of 2017. IHS Markit forecasts growth in 2017 of 10.4% as automakers push sales in Argentina to offset Brazil declines. After an extremely strong first quarter, April sales increased by only 4.7% y/y, pulling the YTD gain down to 32.9% y/y. The market is expected to see a strong 2017, followed by declines of less than 2% from 2018 through 2020 before a return to growth in 2021.
April's 4.7% y/y increase in registrations was markedly lower than March's 38.7% y/y gain, February's 20.5% y/y improvement, and January's 63.1% y/y surge (reflecting a difficult January 2016, with no registrations during its first 10 days).
Ongoing effects from peso depreciation and economic and political instability have held the market back. Argentina was once pushing to become a 1.0-million unit market by 2016. This is no longer expected in the current forecast period. IHS Markit now forecasts natural replacement demand would be about 800,000 units/year, a figure the market is unlikely to see before 2025.
We expect the Argentine market to move towards 730,000 light vehicles/year in 2022 as the economy stabilises. IHS Markit considers that natural replacement plus population growth and GDP/capita put Argentine demand at about 800,000 upa in the long term. SAAR in the second half of 2016 exceeded 700,000 units and in November 2016 and again in February 2017 it topped 800,000 units.
Higher vehicle pricing (up 36.2% y/y over the first two-thirds of 2016) has not slowed the market. While vehicle prices are up 34.1%, there was a 60% y/y currency devaluation and 38% inflation. We assume that foreign exchange changes are starting to reach cars, but this may depend on when Brazil starts to grow again. Additionally, the government raised the threshold for luxury tax in December, which could enable some models to be priced higher without incurring heavier duty.
In June 2016, Argentina and Brazil entered into a new trade agreement on a four-year term. The Argentine government resisted both a free-trade agreement and the increase Brazil requested to allow USD1.8 in imports for every USD1 exported, up from the current USD1.5. In the end, the USD1.5 figure holds through until 1 July 2019 although it could be raised to USD1.7 with approval from both parties. The two countries have agreed to shift to a free-trade agreement from 2020. The negotiations are in part driven by Brazil's efforts to increase its export base as its own market is in decline. It also illustrates that a broader agreement would benefit Brazil more than Argentina, whose exports of assembled vehicles would stand to gain less. A lack of foreign currency had also been restricting imports of cars and components, reducing supply. The factors improving sales include the government's efforts to free up more foreign currency, to make vehicles available for the local market and offset some impact from the plunge in exports to Brazil.
The December 2016 tax change followed an adjustment in January 2016, which cut excise taxes and reduced tax on cars costing over ARS350,000 (USD26,500) from 30% to 10%. The tax on luxury vehicles costing more than ARS800,000 dropped from 50% to 20%.
Contributed by G.G.