The Mexican Auto Industry Association (Asociación Mexicana de la Industria Automotriz: AMIA) has released data showing the country's light-vehicle sales, production and exports for August 2014. August delivered a 17.6% increase, continuing the double-digit gain delivered in July (after two months of year over year (y/y) flat sales, July turned out an 11.0% increase). Light vehicle sales reached 103,881 units in August, with passenger cars making up 68,611 units and light trucks 35,270 units. Passenger car sales increased by 20.2% and light truck sales increased by 12.9%. Nissan was the top seller, moving 26,508 units, an increase of 19.5%. GM held second place with 23,474, an increase of 37.0% in deliveries. Volkswagen (VW) demand gained 3.4%, to 12,648 units. Chrysler saw a 5.0% decline to 7,143 units, which put the company behind Ford’s 7,183 units sold. Ford’s results reflected a 14.3% decline.
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Mexican light-vehicle sales, production, and exports |
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|
August 2014 |
August 2013 |
Change, % |
YTD 2014 |
YTD 2013 |
Change, % |
|
Production |
271,406 |
259,106 |
4.7 |
2,128,634 |
1,986,579 |
7.2 |
|
Exports |
226,757 |
226,902 |
-0.1 |
1,732,262 |
1,580,724 |
9.6 |
|
Sales |
103,881 |
88,332 |
17.6 |
700,452 |
676,964 |
3.5 |
Production has seen steady growth throughout the year, with light-vehicle production in August delivering a y/y improvement of 4.7% y/y to 271,406 units in, bringing the ytd total to 2.12 million units and a 7.2% gain. Honda, Mazda and Nissan additional capacity in early 2014 and late 2013 will help the region see another record year. Production in the country continues to be led by Nissan, who produced 9.6% more this August than last, at 70,273 units. Following behind Nissan was GM with output of 53,645 units, a slight increase of 1.0%. Ford outproduced Chrysler, with 43,405 units still reflecting a 5.3% decline for the Blue Oval. Chrysler production gained 12.0% to 39,021 units. Volkswagen’s 30,756 units (down 37.9%) kept the maker in fifth place. Mazda’s production began in January, and the company held a faster pace than Toyota, building 13,729 units in August, while Toyota built 6,438units (up 9.4%). Among the contributors to Mexico’s increased production in July, along with Mazda, was a 143% gain by Honda, lifting its output to 14,149 units.
Exports from Mexico stabilised in August overall, seeing a 0.1% decline. However, of the light vehicles produced locally, the percent exported increased to 83.5%, compared with 82.3% in July and 79.7% in June. Over the first eight months of 2014, 71.1% of exports went to the US, a total of 1.23 million units and an increase of 17.6%; 168,761 were shipped to Canada. Canadian exports increased 27% in August to 168,751 units ytd and accounted for 8.4% of Mexico’s export volume year to date. Mexican producers saw exports to Latin America decline by 15.5% in 2014, to 171,919 units, as several countries in that region see struggling sales. Nissan exported the most in August, with 47,678 increasing exports by 7.8%. Ytd, the company has exported 367,447 units – while a gain of 22.9%, it is below GM’s 380,033 exported. Chrysler has exported more vehicles through the first eight months than Ford (310,730 units versus 299,047 units), though Ford bested Chrysler in August (41,756 versus 36,611).
Outlook and implications
Overall, registrations of light vehicles returned to pre-crisis levels, which stood at over 1 million units between 2004 and 2008, largely by improving access to credit. Currently, about 54% of vehicles are financed, compared with 70% before 2008 and 48% in 2009. Overall, vehicle demand bucked the economy thanks to a return of credit and an aggressive push by the OEMs. Also, with sales exceeding the 1-million-unit mark, it is largely considered business as usual. This contributes to the market moving at a more moderate pace beginning in 2014, with IHS Automotive forecasting the year increase by 1.55% to 1.079 million units immediately – a lowered forecast compared with earlier in the year. While August and July showed notable gains, the earlier half of the year was volatile. Going forward, we forecast sales in the 1.11 to 1.22 million unit range through 2019, increasing to 1.27 million units in 2021.
Results earlier in the year were thought to be a result of a severe winter as well as tight credit. May and June saw slowing demand from consumers worried about the impact that new financial and tax legislation. Dealers now must report the sale to the Secretary of Finance, which may run a cross-check of big-ticket items against income. We have adjusted our mid-term forecast to reflect this concern, as consumers get used to the new measures. July and August may indicate consumers are adjusting. Overall, however, we expect credit conditions to continue to improve and the moderate pace to become the new trend.
In reporting August 2014 figures, the AMIA noted that the Banco de Mexico reduced GDP growth expectations for the year 2014 of 2.47%, predicting a general inflation rate of 3.82% for 2014 and 3.85% for 2015. It called out public insecurity, weakness of the domestic market and fiscal policy as three factors that could impede growth. Domestic demand has been adversely affected by new consumption taxes, including carbon taxes on gasoline and diesel and taxes on sugary drinks and non-core food with high caloric density. In August 2014, the fifth component of the consumer confidence index, which measures intent to purchase durable goods, dropped to 73.7 points, 7.3% lower than August 2013 and 34.6% lower than 2007.
Sales volumes in Mexico are still held back somewhat by the oversupply of used vehicles from the US. The AMIA previously said that used vehicle imports into Mexico grew 53.3% in 2013, holding back new vehicle sales despite being taxed at a higher rate than new car imports, which will continue as a temporary law has been extended. However, used car imports have been falling throughout 2014, with July seeing a 17.4% decline.
Meanwhile, further investments by automakers and component suppliers in Mexico bode well for the country as a production base in future. Mazda and Toyota, Honda, Nissan and the Infiniti-Daimler partnership either announcing or beginning production since late 2013. Audi’s plant construction has begun, due online in 2016. Kia announced a USD1 billion investment in August. Suppliers also continue to expand their facilities in the country.
We anticipate that production in Mexico will break see production of 3.24 million units in 2014, on its way towards 4.2 million units in 2017. Mexico will eclipse Brazilian output in 2014. The two are forecast to run a tight race until 2017, when Mexico takes a firm lead. In 2014, production increases in Q3, though output may be sequentially lower in Q4 2014. We also see output surpassing 4.80 million light vehicle units in 2019 as capacity and component supply networks are widened and improved.
