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March 30, 2017
Wednesday, January 7, 2015

New car sales plunge 42 percent in Dec.

A total of 683,485 new cars were registered last year.
A total of 683,485 new cars were registered last year.

Decline in the sector, which totalled 28 percent last year, is likely to continue in Jan.

Sales of new cars plunged 42 percent in December, compared to the same month of 2013, a steep drop that managed to raise eyebrows in an industry that had gotten used to declines month after month. It was steeper than the already strong 37 percent drop seen in November.

Overall though, new car sales last year dropped 28 percent when compared with 2013, according to the ACARA association of auto dealerships.

A mere 29,167 units were sold in December, pushing the year’s total to an also poor 683,485 cars registered, when compared with the 956,884 units sold in 2013 — a record.

December is an atypical month for car sales, as the end-of-year bonuses and the propensity of buyers to wait for the beginning of the new year to register their cars makes it difficult to compare with other periods. This makes the monthly comparison with November, which showed a 25 percent decline, less significant than it might seem at first glance, although analysts say the decling trend is still real, and should continue into January.

The poor 2014 for the auto industry began late in January, after the Central Bank led by Juan Carlos Fábrega stopped selling dollars and there was a steep devaluation as the peso went from 6.9 pesos to eight pesos in one fell swoop.

This reduced the purchasing power of potential buyers, which had been rising in previous years as the frozen exchange rate meant salaries were worth more, making the auto sector’s goal of reaching one million units sold in a year impossible to reach.

Declines are likely to continue this month considering that 108,000 units were sold in January 2014 — almost four times December’s figure.

OTHER FACTORS

Although the car sector has been complaining about the luxury car tax’s effects on costs as another reason behind the drop in sales, estimates from the Economy Ministry note that, as of March 2014, it only affected four percent of the vehicles available to the public. That tax only started being a bigger weight on the sector later in the year, when prices rose but the value of what was considered a “luxury” car remained frozen.

Recently, the government increased the price floor at which cars are considered part of a “luxury” sector by 15 percent, a move ACARA said would not be enough to restore demand.

In an effort to stimulate the sector, the government also launched the Procreauto plan in June, offering credits at subsidized rates to improve access to cars, but factories have not been able to keep up with that demand throughout the year.

ACARA president Abel Bomrad said yesterday that “despite the problems that we’ve gone through, it is fair to say that the Procreauto plan helped to end the year with more than 680,000 units sold.”

Numerous conflicts emerged due to delays to deliver units, as companies protested about rising costs affecting imported components and Industry Minister Débora Giorgi blamed companies for raising prices so high that their own industry ended up being damaged.

The car industry has been in a year-long conflict with the government due to delays in authorizations to import spare parts, as the Central Bank is trying to preserve its dollar reserves from purchases of a speculative nature, which bet on future devaluations that would increase the value of those parts.

Herald with Reuters

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