Car sales soar in Chile, sputter in Argentina

Sales of light vehicles in Chile hit a record high last year, as the currency crisis in neighboring Argentina sapped demand in the second half after a strong January-June.

In Chile, sales grew 16% to 417,038 – the highest tally since local motor industry chamber Anac's records began.

Chile's economy minister, José Valente (pictured), attributed the performance to the strength of the economy, which expanded around 4% in 2018, according to central bank estimates.

"This record growth in vehicle sales demonstrates that Chile is moving forward and will continue to do so in 2019," Valente said in a statement.

Anac secretary general Gustavo Castellanos attributed growth not only to the performance of the economy but also to the range of financing options provided by the 68 marques operating in Chile.

Meanwhile, Spanish financial services giant BBVA, in a research report, said a strong start to 2018 partly offset a slowdown in the second half in Argentina. Indeed, figures from motor industry chamber Acara show the sale of new cars began sliding around mid-May, shortly after the first major run on the peso of the year.

Passenger car sales totaled 610,486 units in 2018, an 8.0% drop from 663,565 in 2017, according to Acara data. Overall vehicle sales, including commercial vehicles, were down 10.9% to 802,992 units.

"After a first half with record sales, the Argentine automotive market sank abruptly as a consequence of the forex crises in the months of April and September that crumbled consumer confidence, added to the sudden loss of purchasing power and the hiking of interest rates that impeded vehicle financing," BBVA said, adding that vehicle exports rose in the last few months of the year.

The central bank's benchmark rate stands at around 60% and annual inflation was running at 48.5% in November.

A brighter 2H19 for the automotive sector is expected.

"For 2019 an improvement in the sector is forecast for the second half, stemming from projected sustained growth in Brazil, a drop in inflation and a reduction in interest rates," BBVA said. "However, the total sales of vehicles in the domestic market could fall 4.8% [to around 630,000 units]."

The fortunes of Argentina's insurance industry are closely linked to that of the wider economy. Mandatory auto and workers compensation insurance account for around two-thirds of premiums.

"How Argentina's insurance sector performs can largely be explained by how auto insurance evolves and how workers compensation insurance evolves," Lionel Moure, an insurance analyst at the Argentine office of professional services firm Deloitte, told BNamericas.

The World Bank forecasts Brazil's economy, which is closely linked with Argentine exports, will grow 2.2% this year, up from an estimated 1.2% in 2018. For Argentina, the multilateral expects a contraction of 1.7% for this year, an improvement on the estimated 2.8% contraction for 2018. Growth of 2.7% is expected for 2020.

Chile's economy is forecast to expand 3.5% this year and 3.3% in 2020.