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August 31, 2014
Tuesday, May 6, 2014

Car sales plunge as Brazil trade shrinks

The country’s tax revenue rose by a more than expected 37.1 percent in April from a year earlier to 92.74 billion pesos. The increase can largely be explained by double-digit consumer price increases while a sharp drop in the value of the currency since the start of the year also contributed to the increase in peso-denominated tax receipts from exporters raking in dollars.

Sharpest decline so far this year adds to concern over lasting effect of tax hike

New car sales plunged by the sharpest monthly amount so far this year in April, decreasing by 35.5 percent compared to the same month of 2013 as the domestic market continued to feel the pinch of the luxury goods tax hike as well as the steep devaluation, both of which came into effect in January.

With thousands of workers suspended at several of the countries’ auto factories, the sector’s crisis has been augmented by decreased levels of production, in turn accentuated further by a depleted trade balance with Brazil, the main destination for Argentina’s industrial exports.

Car output also plummeted during the first quarter of the year, with production dropping 16 percent compared to the same three months last year.

The 52,901 new vehicles registered last month compared to the 82,042 in April last year brought the overall drop in activity during the first four months of the year to 18 percent, with 272,095 vehicles sold in said period this year compared to the 333,065 between January and the end of April of 2013.

The April figures mark the second consecutive month of steep declines after the ACARA dealership chamber posted a 34.7 percent inter-annual drop in sales in March, a negative 7.44 percent for February and minus 1.1 percent in January, with the latter month relatively unscathed by the devaluation on January 23.

Although the hike to the luxury goods tax only directly affected the top bracket of cars in terms of price, auto makers had to proportionally readjust rates on lower-segment vehicles.

With top-of-the-range, middle and lower segments of new car rates surging — the latter start at approximately 100,000 pesos — activity in the used market was seemingly maintained in January and February as consumers shifted their presence. However, the second-hand segment has also started to be affected by stagnation in recent months.

Used car sales thus plunged 14.75 percent in March compared to the same month of 2013, following in the vein of a wider drop in the automobile industry this year.

ACARA head Abel Bomrad warned that “dealers must adapt quickly to this new reality, which is very different to the last record year in 2013.”

On March 12, a month before their trip to Brasilia last week to negotiate the extension of an auto-trade pact with Brazil, Economy Minister Axel Kicillof and Industry Minister Débora Giorgi met with the country’s main automakers, including Fiat, Renault and Peugeot, as well as dealership representatives.

The sector requested that the luxury goods tax be reviewed, due to forecasts of a negative impact on the sector, but no agreement was reached.

Stalemate

Economy Ministry sources told state-run news agency Télam on Tuesday that Brazil had agreed to import more auto parts from Argentina, which account for the main chunk of the US$3.1billion deficit in the totality of exchanges with the neighbouring country last year.

Brazilian media refuted the news however, and reported last week that a new round of meetings was scheduled for today or tomorrow in Brasilia.

According to local consultancy Abeceb, the auto sector accounts for 45 percent of the total bilateral exchange between Argentina and Brazil.

Cost of parts

Every car that comes off Argentine production lines is manufactured with imported parts worth between US$10,000 and US$11,000, a report by the Investigaciones Económicas Sectoriales (IES) consultancy for the first quarter of 2014 reported yesterday.

IES’ estimate of 16.2 percent for the drop in production seen during the first quarter weighed in close to the number posted by ACARA.

With regard to the struggling auto-parts sector, IES said exports fell 14.7 percent to US$549 million on the values registered during the same period of 2013.

The consultancy elaborates that auto-part sales abroad have declined since 2008. Imports also decreased by 6.8 percent, highlighting an overall slowdown in automobile trade.

The overall deficit with Brazil for the auto sector dropped by 4.5 percent from US$2.253 billion to US$2.152 billion in the same inter-quarterly comparison, according to the report.

Herald with DyN, Télam

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