2014 has proved to be a challenging year for new vehicle sales within Peru. Total new vehicle sales stood at 171,729 units for the first 11 months of the year, down by 7% year-on-year (y-o-y) according to figures from the Peruvian Association of Automotive Representatives (Araper). Breaking down the headline figure, passenger car sales were down by 1%, at 126,251 units.
Commercial vehicles (CVs) saw significant falls over 2014, against a backdrop of falling demand for Peru's key commodity exports and a slowing of economic growth. Light commercial vehicle (LCV) sales were down by 19% y-o-y over 11M14, at 28,656 units; heavy commercial vehicle (HCV) sales were down by 23% y-o-y, at 14,833 units, while bus sales were down by 21% y-o-y, at 1,989 units. This made for a total CV market of 45,478 units over 11M14.
Looking forward, BMI believes there is scope for a recovery in new vehicle sales in Peru across 2015, with passenger cars (+7.3%) set to outperform CVs (+2.2%). BMI's Country Risk team is currently forecasting an increase in GDP growth to 3.7%, from an estimated 3% for 2014.
Encouragingly for the passenger car segment, we believe that household spending will remain relatively resilient to external economic headwinds in 2015. After real private consumption growth slowed from 5.3% in 2013 to an estimated 4.5% in 2014, we now forecast a 4.6% expansion in 2015. The government is looking to cut both income and corporate tax rates in 2015, as part of efforts to revive the slowing economy, according to a statement by Finance Minister Alonso Segura, as reported by Radio Programas in November 2014. Under the plan, the corporate tax rate will be reduced from 30% to 28%, while the lowest income tax band for workers will be cut from 15% to 8%. The proposed cuts will take effect from January 1 2015, according to the minister. This slashing of tax rates should give Peruvian consumers more disposable income to spend on 'big-ticket' items such as a new car.
Rounding out the supportive backdrop for new car sales into 2015 is our belief that the central bank will keep its reference rate unchanged at 3.50% through 2015. This should aid any Peruvian consumers seeking financing for their new car purchases.
On the negative side, we believe that the Peruvian sol will continue its depreciatory trajectory in the coming quarters, driven by weakening trade dynamics and a strengthening US dollar. Intervention by the central bank will curb the magnitude of currency weakness, but the depreciatory direction of the unit will remain in place. This will increase the cost of imported new cars to Peruvians.
For CVs, we believe that the current situation is not as encouraging. A weak outlook for the mining sector will keep gross fixed capital investment subdued in 2015. Moreover, we expect lower global demand for metals, especially from China, to result in a negative export performance in 2015. This will likely see businesses looking to cut back on spending in areas such as fleet renewal.
Against this backdrop, BMI is currently targeting 6% growth in new vehicle sales for 2015. Over the full forecast period to 2018, BMI forecasts 29% growth in new vehicle sales, to reach around 234,000 units sold per annum. We expect stronger growth from passenger cars than commercial vehicles over the period, against a backdrop of falling government expenditure on infrastructure projects and still-sluggish demand for Peru's key mineral commodity exports.
Recognising the clear medium-term potential of the Peruvian passenger car market, in August 2014 Ford Motor Company announced that it would be setting up a new national sales company, Ford Peru. According to a company press release, Ford currently accounts for a little less than 1% of the Peruvian auto market, but the automaker's local sales team is confident it can improve on that, citing marketing and sales manager Rene Oliveros Rivas. 'This is an extremely competitive market, with more than 100 brands available. But we are confident the additional products Ford will be offering will appeal to our Peruvian customers and that we will be able to increase our share of the market to 4% in 2017'.
To help boost the company's current small share of the market, which has reportedly been concentrated within the EcoSport, Ranger and Explorer models, Ford plans to launch new models, such as the Fiesta, Focus and Fusion, in Peru for the first time. Ford had previously been represented in Peru by Manasa .
According to an October 2014 report by El Comercio, Ford will initially be working with three local dealership partners, Auto Summit Peru, Autoland and Autrisa.
Across 2014, Toyota Motor remained the top-selling brand in Peru. However, over the past 12 months, its long-held market dominance has come under threat from Kia Motors, which has seen strong growth in passenger car and sport utility vehicle (SUV) sales in particular. Together with third-placed Hyundai Motors, the top three manufacturers account for 42% of the local market, underlining the challenge facing other car companies seeking to increase their share of the Peruvian passenger car market. Other popular passenger car brands in Peru include Chevrolet, Nissan, Suzuki, Volkswagen , Mazda, Renault and Mitsubishi.
Looking at the best-selling CV brands, within the LCV segment (including pick-ups), Toyota retains a dominant market position with its Hilux pick-up model, alongside Mitsubishi and Chevrolet. Within the HCV segment, US truckmakers Freightliner and International remain big sellers, alongside Volvo Trucks and Hino Trucks. The bus sub-segment remains dominated by Mercedes-Benz .