Argentina April. KTM defends the position while the Two Wheelers market is collapsing

Argentine Motorcycles Market

Argentine Motorcycles Market is collapsing hit by the economic and financial crisis and in the first four months of the 2019 have lost 48% of volume, being the worst market globally. Honda has consolidated the leadership while Zanella dropped in third place, overtaken by Motomel. The italian Benelli is leader among the premium brands, while KTM is losing only 9%.

 

Economic Environment

Argentine economy plunged throughout Q4 2018, hit by sky-high interest rates, a contraction in credit, soaring inflation and downbeat consumer confidence. December’s fall in economic activity was a familiar story, characterized by a contraction in most sectors. Nevertheless, shrinking domestic demand, coupled with growing agricultural output and the delayed effects of a weaker peso, are leading to a notable external adjustment.

On 5 April, the IMF unlocked a USD 10.8 billion financing tranche to be disbursed to Argentina on 9 April, part of the revised USD 56.3 billion stand-by agreement reached in October to protect the peso and help revive the economy. The Fund praised the government for outperforming its 2018 primary deficit target but also urged it to further cut spending and adopt pro-growth, market-liberalizing reforms.

The pace of contraction should ease this year, thanks to rising external demand and agricultural production. However, runaway inflation and sky-high interest rates will continue to devour consumer spending and fixed investment, with the latter further hit by political uncertainty ahead of October’s elections.

 

2019 Market Trend

The start of the 2019 is horrible for the Argentinian two-wheeler industry with the domestic sales declining with a huge speed since January. The fall is not unexpected, considering the over 40% lost already reported in the fourth quarter 2018 and the persistent economic crisis which is cutting demand for consumer goods, while inflation is back on the sky.

Indeed, according to data released by the Minister of Infrastructures and Transportation, January sales were 42.450 (-44.8%), February was at 33.557 (-42.4%) and March at 32.288 (-53.8%) ending the Q1 with only 108.295 units, down 47.2%.

The start of Q2 was not better, with April sales at 29.712, down 52.9% and with year to date figures at 138.007 (-48.5%).

 

Best selling Brands

As far as regard the competitive landscape, after having conquered back the leadership in the last months of 2018, the Japanese Honda is now creating a huge gap over all the others competitors. In the first four months of 2019, Honda sold 30.965 units (-36.6%) substantially gaining in terms of market share.

In second place the local brand Motomel, which overtook Zanella by few units, selling 19.346 units (-46.0%) and 14.0% of market share.

In third place the local icon Zanella, which was leader for 8 consecutive years before to lose the head of the market last year. Actually the Argentine brand is really in difficulties ending the first four months of the year with only 17.704 sales (-64.5%), while one year ago sales were aligned with Honda.

In fourth place Corven Motors with 16.720 sales (-40.2%) followed by Gilera with 10.078 (-46.6%), Keller with 9.058 (-8.8%) and Yamaha with 7.883 (-71.1%). 

In the market there are over 50 brands, including the Indian Bajaj Auto, actually in 9th place, and Hero, in 16th. Among the best, KTM is down only 9%.

 

Market Heritage

The Argentinian motorcycles market is one of the most interesting in Latin America, with sales hitting the milestone of half million sales in a single year in the 2014 and then jumped near 0.7 million in the 2017, when the “new deal” in the economy introduced by the President Macri, a strong sustainer of the automotive industry, achieved its peak.

In the 2017 this market was the fastest growing in the World with sales accelerating 44% hitting the new all time record of 688.647 and ranking as World’s 11th market and third in Latin America behind Brazil and Mexico.

Unfortunately, starting from the Q2 2018, Argentina was back in the middle of a financial crisis and the economy entered in recession with currency depreciation, raising inflation and the introduction of austerity measures which have killed the consumer’s demand in the entire automotive sector.

The two-wheeler industry was hit severely and the market started a fast drop since mid of the year ending the 2018 with relatively low lost (-15.9%, only thanks to the positive first half score. 

Indeed, according to data released by the Argentinian Minister of Transportation, the motorcycles and scooters sales in 2018 have been 578.749 (-15.9%) still at the second highest level ever for the market. However, the Q4 fall was heavy and the market fell down near 50% compared with the correspondent period in the previous year and the 2019 outlook is now almost negative with an expected fall between 20 and 25%.   

In the 2018 Zanella has celebrated the 70 years from the foundation. Originally an assembly company for auto produced by Peugeot and Fiat, entered the motorcycles sector at the end of the ’50 of last century, affirming their products as leader in the domestic market and exporting in the entire South America. Zanella was market leader in Argentina between the 2010 and the 2017.

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