ConfidencialEmbassy of India in ArgentinaNombre Autor/Empresa Version 1.0 Automobiles & Auto-parts Industry in Argentina October 2018 Confidencial Nombre Autor/Empresa Version 1.0 1. EXECUTIVE SUMMARY 03 6. INTERNATIONAL TRADE 30 Exports 31 2. MARKET VISION AND STRUCTURE 04 Imports 32 TABLE OF Value chain structure 05 Trade balance 33 Market size 06 Automobiles export partners 34 Geographical distribution of Automobiles exports by category 35 CONTENTS national production 07 Automobiles import partners 36 Turnover 08 Automobiles imports by category 37 Top 5 Argentine auto parts 10 Auto-parts export partners 38 National production 11 Auto-parts import partners 39 Car loan market 14 Argentine market share 40 Vehicle fleet 16 7. OPPORTUNITIES FOR INDIAN COMPANIES 41 3. MAIN COMPETITORS 18 Main automobiles competitors 19 8. CONSIDERATIONS FOR FOREIGN INVESTORS 43 Main auto parts competitors 20 Country overview 44 Current economic context 45 4. PUBLIC POLICIES AND TRADE AGREEMENTS 21 Taxation and labor 47 Public policies 22 Relevant legislation 59 Trade agreements 25 Exchange rates 60 5. INDUSTRY TRENDS 26 Recent trends 27 9. CONCLUSION 61 Medium-term demand 28 Future perspectives 29 10. USEFUL INFORMATION 63 2 Embassy of India in Argentina | Automobiles and Auto-parts Industry in Argentina EXECUTIVE SUMMARY The demand in the automobile domestic market reached 883,000 units in 2017, while the auto parts industry generated USD 6.39 billion the very same year. While SUVs and commercial vehicles represent 57% of national total production, 71% of the vehicles sold in the domestic market are imported. The Argentine automotive fleet comprises 14 million vehicles, 75% of which are cars. Half of those vehicles are registered in the City of Buenos Aires and the Province of Buenos Aires. The automotive trade balance has been in deficit since 2017. While the deficit in the automobile industry stood at USD 4.25 billion, automotive parts industry recorded a trade deficit of USD 6.3 billion. Argentina’s main trading partner is Brazil, both in respect of the trade of automobiles and automotive parts. Electric cars have a potential for growth within the Argentine market, which generates investment opportunities. 3 Embassy of India in Argentina | Automobiles and Auto-parts Industry in Argentina MARKET VISION AND STRUCTURE 4 Embassy of India in Argentina | Automobiles and Auto-parts Industry in Argentina VALUE CHAIN STRUCTURE AUTO PARTS AUTOMOTIVE DISTRIBUTION AND TRADE INDUSTRY INDUSTRY Foreign Market Auto part Vehicle production Car dealers production . Sets and subsets . Cars Input suppliers Input . Parts, pieces, and . SUVs components . Freight and passenger . Tires transport Domestic market Replacement market Imports 5 Embassy of India in Argentina | Automobiles and Auto-parts Industry in Argentina MARKET SIZE 20 Vehicle manufacturers Vehicle body manufacturers 78,000 300 Employees 1217 Automotive parts manufacturers TOTAL REVENUE DOMESTIC MARKET RESALE OF IMPORTED UNITS AUTOPARTS 883.802 vehícles 624.794 vehícles 2017 USD 6,392 million 6 Embassy of India in Argentina | Automobiles and Auto-parts Industry in Argentina GEOGRAPHICAL Tucumán Santa Fe DISTRIBUTION OF NATIONAL PRODUCTION Córdoba 7 The production chain is located in 4 provinces: Buenos Aires, Santa Fe, Córdoba and Tucumán Buenos Aires Buenos Aires, Santa Fe and Córdoba produce vehicles and auto parts. Tucumán only produces auto parts. Source: Ministry of Treasury 7 Embassy of India in Argentina | Automobiles and Auto-parts Industry in Argentina TURNOVER. EVOLUTION. Total sales of national automobiles in the domestic and foreign markets 900,000 $27,165 $30,000 800,000 $23,158 $22,117 $25,000 700,000 $17,835 $18,573 600,000 $16,425 $20,000 $15,156 $14,898 500,000 $13,328 $11,926 $15,000 400,000 $9,395 $9,310 300,000 $10,000 $6,277 200,000 $5,000 100,000 0 $- 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Compiled based on information provided by ADEFA. National Production (units) Sales Mill. (USD) The national automobile production hit all time high in 2011 with 828,771 units produced. Production has decreased year after year since 2013 reaching a total of 473,408 units in 2017, which represented a 40% drop compared with 2013. It is estimated that the total production in 2018 will be similar to last year’s production. The industry’s turnover followed the same trend, except in 2017 where turnover in dollars increased. The reason for such increase lies, mainly, in the fluctuation of the exchange rate: when the argentine peso depreciated 60% in the period 2015-2016, it just depreciated 12% in the period 2016-2017. 8 Embassy of India in Argentina | Automobiles and Auto-parts Industry in Argentina TURNOVER. CURRENT SITUATION. Sales of auto parts of the last 5 years 9,000 $7,734 8,000 7,000 $6,387 $6,200 $6,392 $5,794 6,000 5,000 4,000 3,000 2,000 1,000 0 2013 2014 2015 2016 2017 Source: AFAC and companies of the industry. During 2013-2017, the sales of automotive parts declined in keeping with the decrease in automobile production. This demonstrates that the auto parts industry relies heavily on the automotive industry. 9 Embassy of India in Argentina | Automobiles and Auto-parts Industry in Argentina ARGENTINE AUTO PARTS 1. Transmissions TOP 5 AUTO PARTS 2. Engine parts MANUFACTURED IN 3. Engines ARGENTINA 4. Wheels, tires, and cameras 5. Vehicle bodies Source: AFAC. A great variety of auto parts are manufactured in Argentina, particularly transmissions, engine parts, engines, wheels, tires, chambers, and vehicle bodies. 10 Embassy of India in Argentina | Automobiles and Auto-parts Industry in Argentina NATIONAL PRODUCTION BY SEGMENT 26% 33% 29% 30% 35% 39% 36% 36% 41% 41% 43% 49% 57% 74% 67% 71% 70% 65% 61% 64% 64% 59% 59% 57% 51% 43% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Automobiles SUVs/Commercials Source: Compiled based on information provided by ADEFA. The output of the Argentine automotive production has mainly been automobiles and, to a lesser extent, SUVs. This trend shifted in 2016 when the number of manufactured SUVs almost equated the number of automobiles. In 2017 the number of SUVs manufactured outdid the number of automobiles produced the very same year. 11 Embassy of India in Argentina | Automobiles and Auto-parts Industry in Argentina NATIONAL PRODUCTION VS TOTAL SALES 1,100,000 1,000,000 883,802 900,000 National 800,000 production vs. 700,000 total sales in the 600,000 domestic market. 500,000 473,408 400,000 300,000 200,000 100,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Production (units) Total sales (units) Source: Compiled based on information provided by ADEFA. Even though national production of vehicles dropped, the total sales in the domestic market did not follow the same trend. Conversely, sales have been following an upward trend since 2015. This increased the supply deficit, which was subsequently covered by imports. Of the 473,408 units produced in Argentina in 2017, only 259,000 (54%) were allocated to the domestic market, which means trade deficit was overturned with 624,794 imported units. 12 Embassy of India in Argentina | Automobiles and Auto-parts Industry in Argentina NATIONAL PRODUCTION VS IMPORTS DOMESTIC MARKET SALES BY ORIGIN OF PRODUCTION 56% 53% 59% 59% 61% 59% 62% 63% 58% 63% 61% 64% 71% 44% 47% 41% 41% 39% 41% 38% 37% 42% 37% 39% 36% 29% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 NATIONAL IMPORTED Source: Compiled based on information provided by ADEFA. Historically, the Argentine automotive market was mainly supplied with imported vehicles. In 2017 imports gained even more participation. 13 Embassy of India in Argentina | Automobiles and Auto-parts Industry in Argentina CAR LOAN MARKET 1.3% 1.2% 0.5% Lienholder 2016 2017 17.0% Banks 16.9% 17.0% Captives 27.1% 33.2% Savings plans 52.8% 46.8% 2017 Automotive companies 0.4% 0.5% 46.8% Dealers 1.3% 1.3% 33.2% Others 1.6% 1.2% Banks Captives Saving plans Automotive companies Dealers Others Source: Compiled based on information provided by ADEFA. Savings plans predominate in the Argentine market: in 2017 almost half of the purchases of vehicles were financed with these plans. Captives came second in place providing 33.2% of financing. 14 Embassy of India in Argentina | Automobiles and Auto-parts Industry in Argentina CAR LOAN MARKET Evolution % 2017 vs 2016 71.8% Lienholder 2016 2017 58.5% Banks 56,787 74,277 Captives 91,153 144,507 Saving plans 177,990 204,004 Automotive companies 1,188 2,041 30.8% 31.4% Dealers 4,260 5,596 14.6% Others 5,469 5,335 -2.5% Banks Captives Saving plans Automotive Dealers Others companies Source: Compiled based on information provided by ADEFA. Automotive companies showed the most significant growth in the car loan market in 2017 as compared to the previous year. However, tthese companies hold the least market share. Overall, all creditors saw an increase in the number of car loans. 15 Embassy of India in Argentina | Automobiles and Auto-parts Industry in Argentina VEHICLE FLEET Cars Buses 75.8% 0.6% 10,689,885 84,767 TOTAL VEHICLE FLEET Light Vehicles 14,108,904 Trucks 2,654,647 679,605 18.8% 4.8% Source: Compiled based on information provided by ADEFA. The Argentine vehicle fleet comprises around 14,108,904 vehicles in total, 75.8% of which are cars. Buenos Aires is the province with the largest number of vehicles. 16 Embassy of India in Argentina | Automobiles and Auto-parts Industry in Argentina VEHICLE FLEET Santa Fe 8.4% Córdoba 9.6% City of Buenos Aires 11.5% Mendoza 5% Buenos Aires 39% 17 Embassy of India in Argentina | Automobiles and Auto-parts Industry in Argentina MAIN COMPETITORS 18 Embassy of India in Argentina | Automobiles and Auto-parts Industry in Argentina MAIN COMPETITORS.