The days of a market dominated by two or three automakers is slowly becoming a distant memory in South America. Major production facility investments that began in 1997 (which were later slowed by the economic downturn) are finally beginning to show an appreciable return – increasing local competition. Through 1997, VW, Fiat and GM dominated 75% of the local production. However, from 1997 through 2003, ten new plants have or will be constructed in Brazil and Argentina – seven from OEMs other than the historic stalwarts of VW, Fiat, or GM.

The South American market is no longer dominated by Fiat, GM and Fiat

One of the best examples of a successful newcomer to the region is PSA. For many years PSA vehicles were assembled from kits in low volumes but a new assembly facility has bumped total PSA production in South America by 121% in 2000 (from 31,000 to 86,000 units) – compared to a general market growth of 23%. Total year-over-year market gains in 2001 are expected to continue to improve by approximately 10% in 2001 with PSA bucking the trend – rising an estimated 35% next year. Although VW, GM, and Fiat are expected to continue their market dominance, PSA is looking to South America for growth. Bolstered by output of the Citroen Xsara and Peugeot 206 1.0 liter, vehicles integrated into the new Porto Real facility, PSA is seeking to gain share in key mass-market segments.

PSA’s 206 offering is the company’s first entry into the high-volume small car segment with the 1.0 liter derivative competing in the popular segment – representing about 60% of the Brazilian market. Local production in this segment includes GM’s new Celta, and aging products from VW (Gol) and Fiat (Uno). An additional aid to PSA’s performance in Brazil is Fiat. Fiat’s output was essentially flat through 2000 due to its aging Uno Mille, Siena, and Palio offerings and the lack of any major product launches over the short-term (A-B introduction in 2003). Fiat’s volumes are not forecasted to improve in the short-term enabling new entrants such as PSA to take additional market share.

PSA has built a comprehensive base in South America

PSA has built a comprehensive base in South America. In Argentina, production began in the Villa Bosch facility in 1999 and production of the Peugeot 206, Peugeot Partner, and Citroen Berlingo surpassed market expectations. Unlike most manufacturers in the region PSA, operated at above 65% capacity utilization (compared to a market of 50%). In Chile, PSA has CKD operations for imported kits from France. The low volume local manufacturer assembles the 206, 406 and 307 for local consumption and some exports to Mexico, Colombia, and eventually Venezuela. Additionally, in Uruguay, PSA successfully introduced the 306 and Renault the Twingo.

In the short and medium term, a key advantage PSA has over larger well-established companies in the region is long-standing reputation. Although PSA is a company that has been present in sales or CKD operations in the region it was not until 1999 that full production seriously began in Argentina. Therefore, as most companies try to dig themselves out of three years of poor performance (sometimes as low as 9% capacity utilization), PSA will not only have its brand established but will also have new assembly facilities up to speed as the market experiences a growth period this decade.

South American Production: PSA Group as a Percentage of Light Vehicle Production

Author: Cristina Rangel is the editor of CSM Worldwide South American Vehicle Production Forecast. The automotive industries most detailed analyses into South American light vehicle production.

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