The car manufacturers
Colombia’s car assembly industry has seen significant changes of ownership since it began operations a little over 40 years ago. At that time, Austin installed a facility in Bogota to build mid-sized commercial vehicles. A few years later Austin sold it to Chrysler and in the 80’s GM took over. The official name of the operation now is GM Colmotores.
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In the mid 60’s, Peugeot invested in an assembly plant (also in Bogota), but they sold it to Fiat in the early 70’s. The Italian brand worked until the mid 80’s, when Mazda bought the assets and since then has been building small cars and commercial vehicles. The official name is CCA (Compañía Colombiana Automotriz).
Renault has had an assembly plant in Envigado (an industrial suburb near Medellin) since the early 70’s. In 1992, they sold 51% of the assets to Grupo Bavaria (owned by Julio Mario Santodomingo, a Colombian ‘cacao’ -the local name for Korean ‘chaebol’) and 25% to Toyota Corp. The official name is Sofasa.
At the end of the first quarter of 2000, GM has assembled more than 7,200 vehicles, including brands such as Suzuki (subcompacts Alto, Swift, Esteem) and Isuzu (LUV, NPR, NKR and NHR). In the same period, GM exported 21.6% of its production to Venezuela and Ecuador markets. GM also imports CBUs (Suzuki Grand Vitara, Isuzu Rodeo and Chevrolet Blazer) from Ecuador and Venezuela GM plants. In Colombia, the market share of Colmotores is 36%.
The Mazda assembly plant has built around 1,200 vehicles so far this year: Mazda (323, Allegro, 626, B series pickups and mid-sized trucks T45), Ford (Laser and Ranger pickups) and Mitsubishi (Montero SUV). Mazda exports passenger cars to a subsidiary company in Venezuela and imports the 323 from Ecuador. Its Colombian market share is 8.8%.
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By GlobalDataThe Sofasa assembly plant has produced almost 2,800 vehicles this year (75% of them Renault -19, Clio, Twingo and Megane- and 25% Toyota light utility vehicles -Prado and Land Cruiser). Sofasa exports both brands to Venezuela and is trying to break into Ecuador. This plant imports Scénic and Laguna CBU (Completely Built-Up unit). The market share of both badges is 16.6%.
Andean trade framework
A trade and commerce agreement between the Andean countries (Ecuador, Venezuela and Colombia) includes the automotive industry. There are no tariffs between the countries, but a common external duty close to 35% applying to CBU vehicle is one of the highest in the region. The CKD (Completely Knocked Down) kits have no duties. In Colombia, there is VAT of about 20% on locally assembled vehicles, and of about 35% for CBUs.
Economic and political crisis brings market decline
For the year as a whole, car sales are forecast to reach 60,000 units. The assembly industry dominates with some 60% of the market. The remaining 40% is shared by 25 other brands. The leading importers are Daewoo (as a subsidiary of Daewoo Motor Company), 13.7%; Hyundai (as an importer), 6.5%; Ford (subsidiary), 5.5%; Volkswagen (subsidiary), 1.5%; and Nissan (importer), 1.4%.
Colombian car sales had their very best volume in 1997 when the market absorbed almost 150,000 units. That year, the market share was 50/50 between assemblers and importers. Due to the economic and political crisis in the country, sales fell in 1998 to 123,000 and to slumped to just 60,000 units in 1999. Last year’s best seller car was the Chevrolet Corsa built from a CKD from Brazil.
Low utilization of capacity and poor profitability will hasten restructuring
Currently, the utilized installed production capacity is less than 50%. That means, the efficiency is the lowest in years. Assembly plants and importers (or the subsidiaries) are fighting for market share and profit. All sectors of the industry are resizing their operations – and that means employment reduction, dealers closing and brand withdrawal.
In the medium and long-term, the Mercosur and Mexico trading agreements threaten an acceleration of restructuring. From 2007, there will be no duties in vehicle commerce with Mexico and, as we know, the industrial scale in the Mariachi´s country is big enough to kill the Colombian (and Andean) assembly industry. The picture is almost the same with Mercosur, where the Samba and Tango countries will dominate regional car production. In Colombia, the retail price for a Chevy Corsa is about 10,000 US Dollars; in Mexico, it is just 8,000. The writing is on the wall.
The big question is: will the automobile corporations (GM, Ford, Renault, Toyota) be interested in staying in the Andean countries as commercial protectionism comes to an end? At the same time, the Mexican and Brazilian facilities have seen massive capacity investment and demand has not kept pace in domestic markets. Under-utilisation of capacity will force makers to look for regional exports from those countries. Meanwhile, the Andean countries are under pressure to lower trade barriers in order to fulfill the global commerce agreements.
The only way to support the assembly industry in Colombia and in the other Andean countries is to specialise production as far as possible. This means, for example, that GM Colmotores should only assemble the three door Corsa (the installed production capacity is about 40,000 units a year) and export to Latin America. Sofasa (with almost the same installed capacity) can build the Megane for all the Americas, bearing in mind that the Curitiva Renault plant in Brazil is manufacturing the Clio II and that the Nissan plants of Cuernavaca and Aguascalientes (Mexico) are going to build cars of the French brand. Mazda, the only terminal plant in Latin America only has a capacity of less than 15.000 units a year – a weak production total to pump enough product to the Americas.
If the Colombian government decides that the car assembly industry is not essential for the country’s development, it can negotiate with Brazil and Mexico to retain an autoparts (OEM and retail) industry. The geographical localization of this country makes it a strategic pole for the two giants. Colombia is positioned about halfway between the two countrys; it has two coasts (Pacific and Atlantic oceans) and a significantly developed autoparts industry supplying 35% of the components used by Andean assembly facilities.
Such a decision will have enormous political implications, but is the only way that Colombia will be able to continue to have a regionally relevant automotive industry.
Colombian Car Market
|
.
|
1995 |
1996 |
1997 |
1998 |
1999 |
2000* |
|
Assembled |
87,420 |
79,688 |
86,190 |
66,511 |
36,596 |
3,232 |
|
% market |
63.8 |
67.0 |
57.7 |
53.7 |
61.5 |
63.5 |
|
Imported |
49,654 |
39,213 |
63,307 |
57,447 |
22,877 |
1,860 |
|
% market |
36.2 |
33.0 |
42.3 |
46.3 |
38.5 |
36.5 |
|
TOTAL |
137,074 |
118,901 |
149,497 |
123,958 |
59,473 |
5,092 |
|
% growing |
-5.3 |
-13.3 |
25.7 |
-17.1 |
-52.0 |
1.5 |
*Jan – April compared to the same months on 1999
Juan Vargas Automotive journalist
Direct tel: 57-3-2317434
E-mail: juavar@eltiempo.com.co
