miércoles, 24 de junio de 2020

Mexico, Brazil & Argentina Economics Latin America Snapshot of the auto sector


HSBC Global Research: Snapshot of the auto sector, que aborda el impacto generado por el COVID-19 en el sector automotriz de México, Brasil y Argentina, así como el desempeño de la industria con miras a la recuperación gradual de las economías en dichos países.
 
En el caso de México, el sector automotriz es una de las industrias que probablemente normalice su producción antes que otras, debido a su estrecha relación con Estados Unidos y ventas en el extranjero. Este panorama es distinto al de Brasil y Argentina, países en los que el sector depende de la normalización en la venta de autos nacionales.
 
Los hallazgos clave del estudio son:
 
Para México:
        En abril de este año se reportaron descensos récord en producción (99%), ventas (65%) y exportación (90%) en comparación con las cifras de 2019.
        En mayo, la contracción del sector fue: en producción, 94%; en ventas nacionales, 59% y en exportaciones, 95% en comparación con mayo de 2019.
        Para junio se prevé una mejora gradual, ya que las operaciones relacionadas con los automóviles se reanudaron el primer día del mes.
        La industria manufacturera automotriz tendrá un camino más rápido hacia la normalización debido a los fuertes lazos comerciales y de producción con Estados Unidos. Este escenario está en línea con la perspectiva económica de HSBC, que prevé que el proceso de recuperación de las industrias nacionales puede resultar más lento en comparación con las actividades vinculadas a la demanda externa.
        Además, el Tratado entre México, Estados Unidos y Canadá, vigente a partir del 1 de julio, puede tener un efecto positivo, ya que proporcionará certeza comercial. Por el contrario, las ventas nacionales, que representan una proporción menor de la producción de automóviles, pueden tener una recuperación más lenta debido a los efectos negativos de la pandemia en la demanda interna.
 
Para Brasil:
        La producción de vehículos se mantuvo en niveles relativamente bajos en comparación con años anteriores. La producción en mayo de 2020 representó alrededor del 16% de la producción total de mayo de 2019.
        La producción de automóviles puede aumentar hacia la segunda mitad de junio. Dado que una gran parte de las plantas automotrices se concentran en São Paulo, que ha tenido restricciones estrictas, la velocidad de normalización en algunas regiones podría tomar más tiempo de lo previsto.
        Una demanda interna y externa más débil también podría afectar negativamente la producción. En este sentido, las ventas nacionales cayeron un 74.7% interanual en mayo, mientras que en abril cayeron un 76% interanual.
        Los consumidores pueden seguir siendo cautelosos en el futuro, ya que el indicador de confianza del consumidor alcanzó un nivel bajo absoluto de 58.2 en abril. Se elevó modestamente a 62.1 en mayo.
        La demanda externa puede permanecer débil, ya que los principales destinos de exportación, como Argentina, Chile, México y Colombia se enfrentan a un contexto económico desafiante.
 
Para Argentina:
        La producción automotriz cayó un 84.8% interanual en mayo de 2020.
        En junio, probablemente habrá un repunte a medida que más fabricantes de automóviles reanuden sus operaciones.
        La débil demanda interna y de exportación, aunada a una alta dependencia de la economía brasileña, también afectaría negativamente la producción en gran medida.
        En mayo, las ventas a los concesionarios de automóviles cayeron un 28.3% interanual, frente a una caída del 73.6% interanual en abril.
        Menos ventas a los distribuidores significa que estos intermediarios tendrían una visión negativa del futuro cercano ya que el sentimiento del consumidor se mantiene en niveles bajos.
        La demanda externa también seguirá siendo débil, particularmente con actividades económicas lentas en los principales mercados de exportación de vehículos como Brasil, América Central, Perú y Chile.
 
NOTA: Snapshot of the auto sector es un estudio de HSBC Global Research.

 Autos is the biggest manufacturing sector in Latin America
 We look at recent data for Mexico, Brazil and Argentina
 Mexico’s exposure to the US is a positive; Brazil and Argentina depend on domestic demand returning
Latin America has been one of the regions most affected by the COVID-19 outbreak, and in some countries, such as Mexico and Brazil, confirmed cases continue to rise. However, a gradual re-opening of these economies started in June, despite the health backdrop.
As the largest manufacturing sector in Mexico, Brazil and Argentina, the auto industry has been strongly impacted by the COVID-19 outbreak from both the supply and demand sides. It has also proven to be a relevant leading indicator for industrial activity, given that data is released earlier than in most sectors. Autos accounted for around 3.0%, 5.5% and 4.0% of GDP in Mexico, Brazil and Argentina, respectively.
In this report, we take a look at the shocks experienced in the auto sectors so far across Latin America as well as to the expected performance in the gradual re-opening of economies. We focus on production, exports and sales, which are the three key indicators at the sector level.
In the case of Mexico, the sector’s integration with US manufacturing production and high exposure to sales abroad make the auto industry a strong candidate for a quicker normalization path compared to other industries, particularly in production and exports. A normalization in domestic sales may take longer to materialize, as domestic demand is likely to remain soft throughout H2 2020. This is in line with our view that the recovery process for domestic sources of growth may prove slower compared to activities linked to external demand.
With respect to Brazil and Argentina, which are more dependent on domestic demand, the eventual normalization of domestic auto sales will be key to determining output levels. In both cases, June’s data should already reflect a gradual improvement for the overall industry, as several automakers have resumed operations gradually.
Mexico
The auto industry has been one of the most affected sectors so far in Q2, as related activities were suspended in the second half of March, earlier than other sectors, and stayed practically closed in April and May. Production, domestic sales and exports saw record declines of 99%, 65% and 90% y-o-y, respectively, in April. These figures prompted manufacturing production to fall by 30.5% m-o-m and 35.3% y-o-y in April, which contributed to the record contraction of the overall industrial production indicator of 25.1% m-o-m and 29.6% y-o-y (see Mexico Industrial Production: Nosedive in April due to the suspension of activities, 11 June 2020).
After record declines in April and May, what’s next?
Looking into May, the story will likely be very similar, as production, domestic sales and exports contracted by 94%, 59% and 95% y-o-y, respectively. This may prompt a significant y-o-y decline of manufacturing production and industrial output, as was the case in April. We see a gradualimprovement in June, as the government included auto-related industries in the category of essential activities. This means that auto-related operations were able to resume on 1 June, which should translate into improved figures for the whole sector.
In addition to the gradual re-opening, there are also strong production and trade ties with the US, which resumed activities earlier. In fact, given the sector integration, US manufacturers pressed Mexico to resume activities earlier. Against this backdrop, we think that the auto sectoris a strong candidate to experience a quicker normalization path compared to other industries, particularly in production and exports. This is in line with our economic outlook, which envisions that the recovery process for domestic sources of growth, including domestic auto sales, may prove slower compared to activities linked to external demand.
We recently addressed the exposure of 63 Mexican manufacturing industries to US activity to explore which of them have potential to recover earlier (see Mexico Manufacturing: Which of the 63 sectors will recover first?, 21 May 2020). Our results show that in 36 of the 63 manufacturing sectors, any increase in US total imports could lead to a more than proportional rise in Mexican exports. In the case of motor vehicle bodies and auto parts, for every 1% increase in US total imports, Mexican exports in these industries could grow 1.7% and 1.3%, respectively.
For every 1% increase in US total imports Mexican exports of motor vehicle bodies and auto parts should grow 1.7% and 1.3%, respectively Overall, given that external demand is the most relevant factor for auto production in Mexico, we think that an earlier recovery in other regions, particularly in the US, may prove supportive. Also, the USMCA, effective on 1 July, may have a positive effect, as it will provide trade certainty. In contrast, domestic sales, which represent a smaller share of auto production, may see a slower recovery, as the negative effects from COVID-19 on domestic demand may persist.
Brazil
After a steep decline in April triggered by social distancing measures and restrictions in response to the COVID-19 outbreak, auto producers resumed activities gradually in May. Auto production stood at 43.1k units in May versus only 1,847 units in April, according to data released by the National Association of Automobile Producers (ANFAVEA). However, despite this mild improvement, vehicle production remained at relatively low levels compared to previous years (i.e. production in May 2020 represented around 16% of total output in May 2019). May’s mild rise in auto production could translate into a slightly better industrial production print, especially considering that April’s figures showed a contraction of 18.8% m -o-m and 27.2% y-o-y. Data shows that the automotive industry hasbeen one of the most affected, as April’s capacity utilization fell to 12.5%, down 61.5pps from that in March.
Looking into June, auto production may increase towards the second half of the month, as some automakers will resume plant operations. However, it is still not clear what the normalization pace within the industry will be. On the one hand, some automakers, such as Fiat Chrysler and General Motors (GM), two of the largest automakers measured by domestic sales volume, resumed partialoperations during the third week of May. On the other, automakers such as Toyota, are planning to remain non-operational at least until 22 June. Given that a big portion of auto plants are concentrated in Sao Paulo, which has had stringent restrictions, the speed of normalization in some regions could take longer than originally anticipated.
The speed of normalization could take longer than anticipated
While Sao Paulo’s lockdown measures started to ease in early June, its Mayor Bruno Covas did not rule out the reversal of easing measures if the situation worsens. This downside risk may build up, as COVID-19 confirmed cases continue to rise amid the normalization of activities. Weaker domestic and external demand could also affect auto production negatively. New registrations, a proxy for domestic sales, were down 74.7% y-o-y in May to 62.2k units while April new registrations dropped 76% y-o-y.The weakness reflected the impact of temporary businesses closures as well as softness in consumer demand for non-essential big ticket items. Consumers may remain cautious going forward, as the consumer confidence indicator reached an all-time low level of 58.2 in April. It rose modestly to 62.1 in May. Finally, external demand may remain weak, as key export destinations, such as Argentina, Chile, Mexico and Colombia are facing a challenging economic backdrop. These countries together accounted for nearly 67% of Brazil’s vehicle exports in 2019. Brazil exported 3.9k unitsin May, lower than the 7.2k units exported in April.
Argentina
Argentina’s auto production fell 84.8% y-o-y in May 2020, or 25k units, fully explained by the COVID-19 impact. May production stood at 4.8k versus 0 in April, according to data released by ADEFA. The improvement in auto production in May lead to slightly better industrial production (IP) figures for the month. Argentina’s April IP recorded a 33.5% y-o-y decline following a drop of 16.8% in March. Automotive was one of the most affected sectors with April capacityutilization falling to 0%.
Into June, autos will likely inch up over the first half of the month as more automakers resume plant operations. Argentina’s largest automakers by domestic sales volume, Volkswagen and Toyota, resumed vehicle production in the second week of May. In General Pacheco and Zarate, places where most of the auto manufacturing plants are concentrated, lockdowns havestarted to ease since the beginning of May. However, Governor of the province of Buenos Aires Axel Kicillof’s announcement of a possible reversal of the lockdown if the situation worsens in the coming days, adds more uncertainty. Moreover, weak domestic and export demand, with ahigh dependence of Brazilian economy, would also impact negatively production to a large extent.
Lockdowns have eased in auto manufacturing areas
We use sales to car dealerships as a proxy of domestic sales with lags, as automakers produce the cars and then dealers sell the cars to people. These sales were down 28.3% y-o-y in May versus a drop of 73.6% y-o-y in April, mainly explained by lower consumer demand for non- necessary items and alsocar dealership closures amidst lockdowns. We believe that less sales to dealers means that these intermediaries would have a negative view of the near future as consumer sentiment remains at low levels, with a second consecutive fall since April.
In addition, external demand will also continue to remain weak particularly with sluggish economic activities in the main vehicle export markets such as Brazil, Central America, Peru and Chile. These collectively accounted for nearly 86% of Argentina’s vehicle exports in 2019.Argentina exported 3.2k units in May, slightly higher than 2.4k units exported in April.
Alexis Milo
Chief Economist and Head of Research, Mexico
HSBC Mexico, S.A., Institucion de Banca Multiple, Grupo
Financiero HSBC
alexis.milo@hsbc.com.mx
+52 55 5721 2172
Jorge Morgenstern
Senior Economist, LatAm
HSBC Bank Argentina S.A.
jorge.morgenstern@hsbc.com.ar
+54 11 4130 9229
Jose Carlos Sanchez
Senior Economist, Mexico
HSBC Mexico, S.A., Institucion de Banca Multiple, Grupo
Financiero HSBC
jose.c.sanchez@hsbc.com.mx
+52 55 5721 5623
Debalika Sarkar
Associate
Bangalore

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