Cars: “Brazil dependence” on exports grows and complicates companies

Data released last week by the association that brings together car manufacturers (ADEFA) showed a drop in the level of activity in the sector. With 18 business days, four days less than March 2023, vehicle production (cars and commercial vehicles) amounted to 43,159 units last month.

This number means 15.1% more compared to February, but 29.4% less compared to the 61,104 units that were produced in March 2023.

In the first quarter accumulated, the sector manufactured a total of 103,293 vehicles, that is, 23.2% less compared to the 134,574 units that were produced in the same period of 2023.

In March, The sector exported 23,484 units, which showed a decrease of 0.4% compared to February.

In comparison, it is against the same month in 2023, the industry recorded a contraction of 27.6% in its shipments.

In the accumulated January-March period, the terminals exported 62,370 units, 7.9% less compared to the shipments registered in the same period last year.

This data is an alarm signal for the sector since sales to the foreign market represent the most important volume of production. Around 70% of the 0km manufactured are destined for export.

That is, the impact on the level of activity of the evolution of the foreign market is more important than what happens in domestic sales.

If the statistics prepared by ADEFA are analyzed, it is seen that Argentina’s dependence on sales to Brazil is increasing.

While a year ago, Brazil represented 56.8% of Argentina’s 0km exports, today they represent 71.7%.

This is because in recent months important markets such as Colombia, Peru and Chile fell. Mexico also fell, but to a lesser extent.

Of the 62,370 vehicles exported in the first quarter, 44-737 were for Brazil. Meanwhile, between Colombia, Peru and Chile, some 12,500 fewer vehicles were sold than at the beginning of 2023.

The reasons that explain this decline have to do, mainly, with internal issues in those countries. Both the markets of Chile, Colombia and Peru are falling and demand fewer vehicles from Argentina.

On the other hand, with Brazil, having a common automotive regime, there are more possibilities to negotiate sales between the subsidiaries of the two countries.

This, as long as the Brazilian economy remains at a good pace. For this reason, the concern of Argentine automotive companies is focused on what happens in the neighboring country.

The main affected by the decline in foreign markets is Toyota – the main local manufacturer and exporter – which this year foresees a reduction of more than 20,000 units in 0km production at the Zárate plant.

But the low loss of Argentine competitiveness due to the rise in domestic costs in dollars is also holding back the exports of all automotive companies.

This means that some models that are difficult to export, because they are not updated or belong to segments with lower demand, cannot sustain attractive prices to enter other countries.