Following the negative data for June, the automotive industry has recalculated its sales projections downwards

Argentine factories saw a drop in production mainly due to lower sales in the domestic market. Exports also fell by 10% in June.

The declining sales of new cars in June dropped by 25.5%, while exports fell by 10.3% and automotive production saw a 40.2% decrease compared to the same month of the previous year. This is concerning for the industry following the encouraging recovery figures seen in April and May. The recovery stalled and even declined slightly at the end of the semester.

In fact, sales estimates for 2024, which had started in January with a projection of 330,000 units (a 25% increase), were revised upwards to 380,000 units in May. However, these estimates now seem to have been revised downwards once more.

“The automotive market ended the first half of the year with a 23% decline compared to 2023. However, one interesting fact is that the market saw a substantial drop in the conventional channel for direct sales at dealerships – a decline of up to 35%. Meanwhile, sales through savings plans saw a 12% growth. Many brands had over-allocated cars in the conventional sales channel during the early months of the year. The decline in the conventional market, driven by brand-wide stock reductions, also resulted in aggressive pricing and competitive strategies from various brands. We opted for a strategy that focused on generating value and profitable businesses,” explained Valentina Solari, Commercial Director of Renault Argentina.

While there are different interpretations of the figures released by PROGRAM, the Association of Automobile Dealers, which collects data monthly through the SIMA system.

Valentina Solari, Commercial Director of Renault Argentina, estimated a production of 340,000 cars for 2024

“One must take into account that June 2024 had four fewer business days compared to June 2023. This means that the average per business day was 6% lower, not 25.5%. We are looking at an automotive market for this year that is projected to reach 340,000 units, representing a 20% decrease compared to 2023. The first months, particularly January and February, saw the most significant declines, around -40%, but then we witnessed a strong rebound in months like May. We believe that the final figure will be 340,000 units for this year,” stated the executive.

Car registrations often spike in the last days of each month to meet dealership goals. This practice, often referred to as self-registration, involves dealerships registering cars themselves to meet brand quotas and ensure units are available in good condition before the start of the next month.

“No one buys cars they aren’t going to sell. Self-registration is also a mechanism that dealerships utilize to secure cars at the price of the current month, knowing that they will have a buyer. This is partly why it happens. However, since prices remain relatively stable during these months, the difference is not that significant. Weighing the financial cost of investing the money once morest the price adjustments, there is not much advantage in advancing operations,” commented a senior executive from an Argentine automotive plant a few days ago.

After a year start that saw a market weakened by economic conditions, virtually all brands will be implementing more aggressive plans for new models that will arrive or return to the Argentine market in the second half of the year. Despite the expectation that the reduction of the PAIS Tax will create a more favorable scenario for importing cars at lower prices, the reduction of the payment period from 180 days to 120 days for securing dollars to settle these obligations will incentivize terminals to bring in larger volumes.

The second half of the year will bring more new developments. The latest launch was the Volkswagen T-Cross, belonging to the competitive SUV-B segment, the one with the greatest competition and growth.

In recent months, new products have been launched in all segments, ranging from Ford Bronco V6 to Volkswagen T-Cross, including the new Toyota Corolla Cross or the luxurious Toyota Crown Hybrid from the Japanese brand, Citroen C3 Aircross, and the Fiat Fastback presented in May. However, even more launches are expected between July and September, including the Renault Kardian, Peugeot 2008, Volkswagen Passat (the latter two models produced in Argentina). The new Toyota Yaris Cross is also expected to arrive by the end of the year.

“In this second semester, 30% of our sales will be imported cars. In the first half of the year, sales of Renault’s domestic production accounted for 15%, while last year they represented 8%. This highlights that in 2023, sales of Renault’s domestic production represented 92%, a source of pride for us. This year, the first half saw sales accounting for 85%, with a projected 70% in the second half,” Solari mentioned.

When we refer to imported cars, we are talking regarding cars from any external origin, not only from outside the region, but also from Brazil and Colombia in the case of Renault, or Mexico for other brands like Ford or Nissan.

“Should the reduction of the COUNTRY TAX materialize, as is being speculated currently, it might not be perceived as favorable news for car manufacturers. Nevertheless, the reduction of the payment term to 120 days will still present conditions that are more advantageous than the first semester. Coupled with the expected economic recovery, even if it progresses at a slower pace than the fabled ‘V’, improvements can be anticipated in the second half of the year,” another executive told Infobae recently.

Argentina’s Automotive Industry Faces Headwinds as Production Drops in June

Argentina’s automotive industry experienced a setback in June, with production falling due to lower domestic sales and a decline in exports. This comes following encouraging recovery figures in April and May, highlighting the industry’s vulnerability to economic fluctuations.

Key Figures Point to a Slowdown

The numbers paint a concerning picture:

• Sales of zero-kilometer cars dropped by 25.5% in June compared to the same month last year.
• Exports fell by 10.3% during the same period.
• Automotive production slumped by 40.2% year-on-year.

These figures suggest the industry is facing a significant downturn following a brief period of recovery. While estimates for 2024 sales had initially been optimistic, the recent downturn has led to downward revisions.

Shifting Market Dynamics

The decline in sales is attributed to a combination of factors, including:

• Economic uncertainty: The overall economic climate in Argentina is challenging, impacting consumer confidence and spending.
• Overstocking: Some brands overallocated cars to dealerships earlier in the year, leading to a saturation of the market, particularly in the conventional sales channel.
• Aggressive pricing: Competitive pricing among brands has put pressure on profit margins.

However, there are some bright spots. Sales through savings plans have shown resilience, indicating a sustained demand for cars in this segment.

Industry Perspectives

Industry executives are providing nuanced analyses of the situation. Valentina Solari, Commercial Director of Renault Argentina, acknowledges the decline in the conventional sales channel (35%), but highlights the robust performance of savings plans (12% growth). She remains optimistic regarding the overall market, forecasting 340,000 units in 2024.

The Association of Automobile Dealers (ADA), relying on data collected through its SIMA system, acknowledges the impact of fewer business days in June 2024 compared to the previous year. It also recognizes the seasonal fluctuations in car registrations, particularly toward the end of each month, due to dealer incentives and self-registration practices.

A Look at Self-Registration

Self-registration, while a valid practice, can blur the lines in sales statistics. Dealers often register cars themselves to meet quotas and secure units at favorable pricing. This practice may not reflect actual consumer demand and can artificially inflate sales figures.

New Models and Market Trends

Despite the current challenges, the Argentine automotive industry is gearing up for a wave of new model launches in the second half of the year.

Key trends shaping the market include:

• Increased focus on new models: Brands are introducing a more aggressive product strategy, aiming to capture market share with new offerings.
• Growing popularity of SUVs: The SUV segment remains highly competitive with strong growth potential.
• Impact of PAIS Tax reduction: The potential reduction of the PAIS Tax is seen as a favorable development for imported cars, potentially lowering prices and boosting demand.
• Reduced import payment terms: The reduction from 180 to 120 days for dollar payments will encourage manufacturers to import more cars.
• Shift towards imported models: Renault, for example, anticipates that imported cars will make up 30% of its sales in the second half of the year.

Expected Recovery

While the first half of 2024 has been marked by challenges, industry experts remain hopeful regarding a recovery in the second half. The combination of new model launches, improved import conditions, and recovering economic sentiment is expected to bolster the market.