While many associate international auto sales growth as being in China and other Asian countries, South American car sales have been rising at a fast clip in much of the region according to a recent article in the Los Angeles Times. While new cars were previously only accessible for the upper class in South American nations, rising wages, more stable economies, and easy credit have helped new car sales reach the burgeoning middle class.
Amongst the middle class in South America, cheap new cars such as subcompact and compact tend to be the most popular due to wage levels and high fuel prices. Sales in South America are further emphasizing the need to strongly compete in the compact car segment.
Brazil is the largest nation in the continent and has a fast growing economy. Brazil’s profile will be lifted considerably over the next 5 years as it hosts both the 2014 World Cup and 2016 Olympic Games in Rio de Janeiro. Brazil sold more than 3.5 million cars and light trucks in 2010, which is an 86% increase since 2006. Argentina, Colombia, and Peru have also seen significant increases in new cars sales.
While Peru, a country with a population of about 30 million, is still a small market with just 116,000 new cars sold in 2010, this amount was triple the amount sold in 2006. New cars sales gained 50% between 2006 and 2010 in Argentina and 25% during the same period in Colombia.
The trend for new car sales looks very promising in the region for 2011. February 2011 new car sales in Colombia totaled 25,247 units, which is a 51% gain compared to February 2010. In Chile, February 2011 sales were up 37% compared to February 2010. Venezuela has also seen a rise in new car sales.
Farther north in Mexico, new car sales have actually dropped significantly between 2006 and 2010. In 2006, 1.2 million new cars were sold while in 2010 just 820,000 units were sold. However, the reason cited for this steep drop in new car sales is the opening of Mexico’s market to used cars from the U.S.
In addition to rising wages, much more favorable credit terms are playing a large role in the increase in auto sales. Several years ago, car loans customarily had to be repaid over a two year period. However, now auto loans can be paid off over a five or even seven year period, making purchasing a car much more affordable for the middle class.
The South American car market is very different than the U.S. market in terms of the models offered. In Peru, Chinese models sell for as little as $7,000. Italian automaker Fiat also has a larger presence in the region.
Sales trends in the region lead to GM South America Vice President Jaime Ardila to state that the company’s Latin America operation is its most valuable asset in terms of return on investment in growth. GM has a 20% market share in the region and is investing $1-billion to expand in the region. Hyundai has plans to open a $600-million assembly plant in 2012 in Piracicaba, Brazil.
