Latin America’s big 3 car markets, a family affair
Although Latin America’s three largest automobile markets are Brazil, Mexico and Argentina, the former is really the only country which has been holding up car sales throughout the region in the last year or so.
While some 2.47 million cars and LCVs were sold in Brazil in 2018, rising by 13.7% year-over-year, Mexico posted a 7% fall to 1.42 million units and Argentina saw a 10.9% drop to 802,992 units last year.
Although Brazil’s healthy domestic market is responsible for most of the performance, the country does depend on exports as well, so how long will these positive numbers actually last?
While the relationship between Mexico and its largest vehicle trading partner - the United States – is crucial to maintaining healthy sales in Latin America’s second largest automobile market, Brazil (No. 1) is highly dependent on exports to its largest vehicle trading partner, Argentina (No. 3).
Much of the region’s success, especially up north, depends on the newly updated North American Free Trade Agreement (NAFTA), more recently known as the United States-Mexico-Canada Agreement (USMCA).
If Mexico sees a fall in exports to the U.S. in wake of USMCA, it may market its cars more aggressively to Brazil, especially following the recent Mexico-Brazil agreement to eliminate taxes and quotas on vehicle trade between the two countries.
According to a study carried out by PWC consulting commissioned by Brazil’s automobile manufacturers association Anfavea, Mexican vehicles are about 18% cheaper to produce when considering overall costs as well as taxes.
As Brazil’s automotive industry is looking to export more to Mexico in the wake of falling exports to Argentina, this may prove to be difficult when it comes to marketing in both Mexico and Brazil. However, Brazil’s government is currently working on tax and pension reform which will likely stimulate investments and improve markets if passed.
Vehicle terminal at Santos Port, Brazil (source: Codesp)
As for Argentina, Brazilian car exports to the country plummeted 45% in the first quarter of this year. Unfortunately, Argentina has been facing a year-long crisis plagued by inflation and the devaluation of its currency and a full recovery looks unlikely this year.
In the end, its key to remember that the automobile markets in Latin America, much like other regions of the world, do depend on each other. Let’s hope for healthy economies in these three countries and maybe even a bit of help from the fourth and fifth ranked markets in the region, Colombia and Chile.