Colombia’s economy and its effect on the automotive market
In many ways, Colombia is an emerging market but also established, with a strong industrial sector, long-entrenched export market and burgeoning infrastructure.
2014 was a bumper year for automotive sales in Latin America’s fourth largest economy but 2015-16 witnessed a downturn. A drop in global oil prices, devaluation of the Colombian Peso and slowdown in economic output made the year disappointing overall. An increase in VAT (from 16% to 19%) served to further decrease consumer spending.
After a disappointing start to 2017, analysts predict an upturn in fortunes and the mood in the automotive industry is upbeat. International businesses have moved in, investment in infrastructure is creating jobs and prospects, companies need vehicles. Higher commodity prices will improve GDP and analysts expect economic growth of 2.3% in 2017.
Colombia has a population of 48.2 million. The current unemployment rate is 8.9%. The automotive sector contributes 4% to the country’s GDP and accounts for 22,000 jobs building vehicles for General Motors, Daimler, Renault and others. 37% of the vehicles on the roads in Colombia come from domestic production.
Colombia is one of LatAm’s largest manufacturers of motorcycles. At the end of 2016, 13 million vehicles were registered in the Andean nation, 57% of them (7.4m) motorcycles, 97% of those were made in Colombia.
In terms of automotive sales, Q1 2017 was disappointing for some but positive for others. Chevrolet took the lead but sales were down 4.7%. For Renault, which enjoys second place as brand leader due to its industrial presence, sales were also down (0.6%).
Nissan did well with sales up 21.1% but only managed third place. Coming in seventh, VW was the clear winner with sales up 38.1%. Sales of Chevrolet Spark increased by 6.9% (4,193 units), but the Sail leaped by a massive 63.5% (3,078 units). The Renault Sandero did reasonably well with a climb of 8.7% (2,615 units).
In terms of fuel, there are service stations in all areas but some are run by local suppliers so prices are high (as much as $3.8/litre). Fuel cards are starting to appear but not yet commonly used.
Incentivizing cleaner technologies is beginning to make inroads. There are tax breaks for electric or Hybrid vehicles. In the cities, through a system of number plate recognition (“pico y placa”), EVs or Hybrids drive unrestricted. However, as yet, there is no charging infrastructure and little support for EVs.
Only time will tell if the automotive industry is right to be optimistic but having innovated its way through deep depressions globally, evidence is strong that maybe now is the time for prosperity in Colombia.
Authored by Alison Campbell
