Starting next year, Opel will begin selling vehicles in Chile, making it the first country in Latin America to launch the brand. just-auto takes a look at the market with the help of research partner Business Monitor International.

Although carmakers operating in Chile are facing a tough year in 2009, industry developments already underway point to the underlying strength of the automotive market. The following is BMI’s SWOT analysis of the Chilean automotive market from its report, Chile Autos Report 2009

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Strengths:

  • One of the strongest Latin American markets, due to high GDP per capita in regional terms.
  • Increased competition through free-trade agreements (FTAs) with countries of large manufacturers – South Korea became the second-largest overseas seller of cars in Chile after a FTA came into effect in 2004.
  • New FTAs signed with India and Malaysia.
  • FTA signed with China in 2006 led to an influx of Chinese vehicle imports during H108.
  • Chile has one of the most attractive business environments for investors, making the country the region’s leading destination for foreign direct investment (FDI).

Weaknesses:

  • Domestic production industry has almost collapsed with just GM now operating production facilities.
  • Output set to fall still further as a result of Chile’s 41 FTAs and an increasing number of imports.
  • Lack of production limits opportunity for investment (carmakers are stepping up activities in other Latin American markets).
  • Vehicle imports from China have a poor reputation in terms of technological quality and after-sales service.
  • Relatively small internal market discourages the development of a production base.
  • Weakening peso against US dollar slowed vehicle sales in 2008.
  • Higher tax levied on premium cars.

Opportunities:

  • Luxury market going from strength to strength.
  • GM has introduced the concept of internet-shopping for vehicles.
  • Chilean government puts strong emphasis upon open competition among imports.
  • Milestone’ agreement concluded with China in H206 set to continue boosting imports.

Threats:

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  • Growing levels of imports are threatening the remaining domestic manufacturers as effects of FTAs are felt.
  • Chile’s failure to comply with the Economic Complementarity Treaty led Colombia to impose a 35% import tariff on GM’s Chilean light utility vehicles (LUVs).
  • Tightening credit conditions in light of the global economic crisis will harm new car sales.

For more information on BMI’s Chile Autos Report 2009, click here.