Colombian Automotive Sector 2018-2019

The country has emerged as the second-largest producer of two-wheel motor vehicles in South America, after Brazil.

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CHAPTER ONE

Sector Overview

The Colombian automotive sector is highly skewed towards the production of motorcycles, the preferred mode of transport for the Colombian population.

  • 49.3mn inhabitants at end-2017.
  • Dependence on imported motor vehicles.
  • The government has pursued an active strategy to promote the development of the domestic automotive sector

As to four-wheel vehicles, although Colombia is the third most populous country in the region with 49.3mn inhabitants at end-2017, both the scale of the production base and the size of the domestic market remain small. This is explained by the relatively low disposable income of the population compared to the regional average, which limits purchases of large durable goods, such as motor vehicles. The domestic automotive industry also features low levels of internationalisation, which makes it vulnerable to the ups and downs of the national economy. However, the industry is not able to meet local demand and Colombia’s dependence on imported motor vehicles and auto parts is extremely high.

The economic boom over the 2010-2014 period attracted several new multinational carmakers willing to tap the robust demand for vehicles in Colombia. Germany’s Mercedes-Benz opened two new manufacturing facilities in 2013 and 2015, while China’s Foton commissioned a fully-owned plant in 2015. The economic slowdown since 2015, however, has shed light on the structural weaknesses of the local motor vehicle industry. Small market size is a major barrier to the expansion of its production base, as domestic sales alone cannot ensure an efficient scale of production. Exports seem not to be an alternative, as the industry – highly reliant on imported inputs – is not competitive enough. Thus, the preferred strategy of new entrants is to sell imported vehicles by establishing their own distribution centres or forging strategic partnerships with local distributors.

Motorcycles are set to continue to be the main driving force of the Colombian automotive sector. This was the subsector least affected by the downturn in vehicle sales over 2015-2017, and the one which recorded the fastest recovery in sales (of 9% y/y) in the first seven months of 2018. As long as the disposable income of the population remains relatively low, motorcycles will continue to be the motor vehicles most in demand. Nevertheless, the production and sales of four-wheel motor vehicles present ample growth opportunities, given the large population of the country and its low motorisation rate – well below those of Brazil, Mexico, Argentina and Chile. In the short term, commercial vehicles (both light and heavy) are set to benefit most from the ongoing economic recovery since early 2018 and the reactivation of investments in those industries that use them most, such as the construction sector.

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CHAPTER TWO

Sector Snapshot

In 2017, the production of motor vehicles in Colombia – including motorcycles – amounted to 694,505 units, which represented an annual increase of 5.4%, a contrast to the decline in domestic sales during the year. Motorcycles continued to be the major subsector, with a share of 81.9% of total output in 2017 in volume terms (i.e. vehicle numbers). They were also the sector’s main driving force, with a rise in production by 6.6% y/y to 568,772 units. Light and heavy vehicles accounted for the remaining 18.1% of the production volume. However, during the year, the production of four-wheel vehicles (i.e. light and heavy vehicles) stagnated, reporting only a marginal growth of 0.3% y/y to 125,733 units. The main reason for this disparate performance is the preference of Colombian consumers for motorcycles in a situation of sluggish economic growth.

Four-Wheel Market Companies

The four-wheel vehicle market is dominated by two companies – US carmaker General Motors through its Chevrolet brand, and French peer Renault. Both of them own assembly and production plants in Colombia, and accounted for a combined 41.2% of total four-wheel vehicle sales in 2017. Nevertheless, during the year, General Motors and Renault posted drops in domestic sales of 14.7% and 8% y/y, respectively. By contrast, companies that operate in the country as importers, such as Nissan, Mazda, Toyota, Volkswagen, Hyundai and Suzuki, expanded their market share, relying on active sales promotion strategies.

Key Players - Motorcycles

Company

Vehicles Sold

Market Share

1. Bajaj

129,673

26.0%

2. Yamaha

94,185

18.8%

3. Honda

81,292

16.3%

4. AKT

64,896

13.0%

5. Suzuki

38,080

7.6%


Key Players - Light and Heavy Vehicles

Company

Vehicles Sold

Market Share

1. GM-Chevrolet

51,253

21.5%

2. Renault

46,863

19.7%

3. Nissan

21,076

8.8%

4. Kia

19,810

8.3%

5. Mazda

18,700

7.8%

 

Production

694,505 units

Motorcycles

Light & Heavy Vehicles

568,722 units

125,733 units


Exports

USD 459.6mn
Light Vehicles:
USD 390.6mn, 38,234 units
Heavy Vehicles:
USD 62.5mn, 1,334 units
Motorcycles:
USD 6.5mn, 3,077 units

Imports

USD 2,605mn
Light Vehicles:
USD 2,295mn, 192,320 units
Heavy Vehicles:
USD 260.1mn, 4,724 units
Motorcycles:
USD 49.8mn, 30,157 units

Domestic Market*

737,930 units
Motorcycles: 499,692 units
Light Vehicles: 222,467 units
Heavy Vehicles: 15,771 units
* Defined as new motor vehicle sales

The production of motor vehicles in Colombia – including motorcycles – amounted to 694,505 units, which represented an annual increase of 5.4%"

In 2017, the Colombian motor vehicle market – including motorcycles – contracted for the third year in a row, by 10.9% y/y to 737,930 units. The key factors explaining this underperformance were the deceleration of the Colombian economy, which grew by 1.8% y/y – the lowest rate in a decade, coupled with high inflation and high borrowing costs, which dampened the purchasing power of the population and the demand for durable goods, including motor vehicles. While domestic production rose, both motorcycle and four-wheel vehicle sales fell in 2017, by 13% and 6.1% y/y, respectively.


Regarding external trade, the motor vehicle industry presented a trade deficit of USD 2.1bn in 2017. The light vehicle subsector recorded the highest deficit (USD 1.9bn), followed by heavy vehicles (USD 197.6mn) and motorcycles (USD 43.3mn). Imports of motor vehicles reached a six-year low of USD 2.6bn in 2017, negatively affected by shrinking domestic demand. However, the country remained dependent on imports of four-wheel motor vehicles, which covered 67.3% of local demand. Moreover, this dependence on imports was not only in respect of assembled vehicles, but also intermediate products, as the trade deficit in auto parts reached a record high of USD 713.8mn in 2017. On the other hand, the country is virtually self-sufficient in terms of motorcycles, as 86% of all new two-wheel motor vehicles sold in Colombia in 2017 were manufactured in the country.

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CHAPTER THREE

Global Positioning

In 2017, Colombia was the 42nd largest producer of four-wheel motor vehicles in the world, according to OICA. At a regional level, the country was the third-biggest manufacturer, after Brazil and Argentina. However, the size of the domestic automotive industry is relatively small, as it only accounted for 2.8% of the total output of South America. The Colombian four-wheel motor vehicle industry features only six plants, with production capacities much smaller than those in the regional leaders. Additionally, the industry is not competitive enough to expand its operations through exports.
China ranks first in global new four-wheel motor vehicle market in 2017.
Colombia has a 6.7% share of the South America four-wheel motor vehicle sales in 2017.
Colombia has 109 vehicles in use per 1,000 inhabitants. Mexico has the most in Latin America with 327 in use per 1,000 inhabitants.

Top 5 Global Four-Wheel Motor Vehicle Producers, 2017

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Top 5 Global Four-Wheel Motor Vehicle Producers, 2017

Ranking Country Production, units y/y change
1 China 29,015,434 3.2%
2 USA 11,189,985 -8.1%
3 Japan 9,693,746 5.3%
4 Germany 5,645,581 -1.8%
5 India 4,782,896 5.8%
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In 2017, Colombia was the 39th largest four-wheel motor vehicle market in the world, with 233,960 newly registered units, according to OICA data. Regionally, Colombia was the fourth-biggest motor vehicle market in South America, following Brazil, Argentina and Chile. Although Colombia has a bigger population than Argentina or Chile, its motor vehicle market is relatively small. Moreover, at end-2016, the motorisation rate of Colombia stood at 109, far below that of Mexico (327), Argentina (287) and Chile (270). This is mainly explained by Colombian consumers preference for more affordable motorcycles.

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