Venezuela Car Market Contracted More Than 38% Year-on-year To 49,264 Units In Q1

Aug. 1, 2009 - PRLog -- Venezuela's automotive industry, and its economy on the whole, are likely to suffer through a combination of domestic and external factors in 2009. As cautioned in the Q309 Venezuela Autos Report, ongoing structural changes within its economy could prevent a return to positive growth for a number of years.

Domestic autos demand continued its downward trend in Q109 due to the import restrictions imposed by the government. The Venezuelan Automobile Chamber of Commerce (Cavenez) estimates that the market has contracted by more than 38% year-on-year (y-o-y) to 49,264 units in Q1, while demand for imported vehicles has shrunk to 15,778 units, down by a massive 66% y-o-y during the period. With private consumption forecasted to contract by 10% y-o-y this year, it is expected new vehicle sales to fall to nearly 160,600 units, down by nearly 40% y-o-y. Thereafter, in line with our expectation of a continued recession in 2010, we forecast demand to fall down further to around 153,800 during that year.

A striking contrast, however, appeared in the manufacturing segment where nearly 3.6% more vehicles, totalling 34,298 units, were produced in Q1. The marginal increase is seen as a by-product of 2008's low production levels. We therefore keep our production forecast unchanged at 98,900 units by end-2009, down by close to 23% y-o-y.

The relatively protective market, exemplified by the Chávez government's stance on imports, has resulted in the country falling from fourth to fifth position in the Business Environment Ratings for the autos industry in Latin America. While foreign carmakers have already been facing issues with the allocation of dollars, the industry has reported fresh labour issues and a lack of authorisation to use foreign currency at the official exchange rate (AAD). These are contributing to the difficult operating environment for existing carmakers, with General Motors (GM) and Toyota Motor having announced possibilities of withdrawing from the country. The former holds the leading position in the industry, both in terms of production and sales, while the latter stands as the third-largest carmaker, following Ford Motor.

The government introduced dual-fuel regulations in April, whereby 30% of all domestic vehicles produced must be powered by natural gas and gasoline. However, successful implementation of the complete plan could require relaxation of the existing structure.

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