What is happening in the Colombian automotive industry?

The automotive industry is going through a difficult period, amidst irregular consumption, high interest rates and the closure of the historic Colmotores plant in Bogotá, which sounded an alarm throughout the industry.

Regarding the closure of the Colmotores plant, Santiago Chamorro, president of General Motors in South America, said at the time that “everything possible was done so that production continued in Colombia.” Even in the face of the adverse outlook, the company invested about US$50 million in the hope that the industry would revive, but as time went by the figures did not show the long-awaited rebound.

Of the 40,000 units they planned to produce with the Chevrolet Joy, only 11,000 were reached. And this not only because the national industry was experiencing a cooling, since in terms of exports it went from 300,000 units to 185,000. In short, demand has decreased and with it production.

The figures of the automotive sector in Colombia

According to information from the National Association of Sustainable Mobility (Andemos), it can be seen that during the first two months of 2024, 27,206 vehicles were registered, which translates into a reduction of 8.37% when compared to the consolidated figure for the same period. from the previous year.

The numbers reveal that the market has experienced other falls, since in 2023 the reduction was 18.89%, while its annual variation was -28.9%, going from almost 262,600 units to just over 186,800.

By brands, of the nearly 150 that are registered in the country, just over 20 registered increases (among these, the bulk are companies that sell few units); the majority consolidated falls at the end of 2023, with an average of 28.9%. Among those that saw the greatest decline are Volkswagen (-55.6%), Suzuki (-51.9%), Renault (-46.6%), Chevrolet (-42%) and Kia (-17.4%). %).

Motorcycles, although they continue to be the healthiest segment of the industry, also had a negative performance, since in 2023 696,360 units were registered, which meant a variation of -15.3%. There was also a drop in transfers, with a decrease of 18.9%.

Only electric vehicles showed a rebound, as they went from registering 27,845 in 2022 to 31,500 in 2023, which meant an increase of 13.1%. Much of this growing demand would respond to the mobility restrictions that cities like Bogotá have, where vehicles with low-emission technologies are exempt from the peak and license plate measurement.

Dane figures show that, in fact, vehicle sales, as well as their spare parts, accessories and lubricants, are the merchandise lines that are experiencing the most declines, with annual variations that, in March, consolidated a -14 .45% and – 19.8%, respectively.

What’s going on?

In an interview with El Espectador, the president of Renault – Sofasa, Ariel Montenegro, explained that the current panorama is the result of the mixture of a series of factors, among which inflation stands out.

“We can talk about a post-pandemic effect. A rebound after the skyrocketing consumption that occurred in 2021 and 2022, which led to more and more people ending up buying with a high interest rate. This took its toll last year with a high level of debt and delinquencies, which has meant that people cannot buy with such great financial leverage, as is usually requested when purchasing a vehicle,” he details.

The data from the financial company Trasunion are along these same lines. Its most recent report shows that delinquency of more than 60 days in vehicle loans reached 7.1% during the first quarter of the year, which in turn implied an increase of 2.62 percentage points compared to the consolidated figure. in the same period of the previous year.

That is to say, not only are a significant number of Colombians struggling to meet their vehicle payments, but the proportion of users who default on their payments has grown.

Transunion details that, given the current panorama, there are also fewer and fewer people who are approaching a finance company to request a vehicle loan, or who are at least able to be granted one. In the first quarter of the year this figure fell 22.7%, which also implied an increase of 4.3 percentage points in this matter compared to the same period in 2023.

Montenegro adds that due to the rise in commodities and geopolitical complexities, the costs of manufacturing vehicles have also been increasing (a trend that could continue).

To this price equation we should also add that cars are increasingly becoming complex technological objects (whether in emissions reduction, road safety or connectivity), and that has its echoes in the final cost.

Another important ingredient would be the disinterest that mobility restrictions (such as those in the capital) have generated in many, since it is not attractive to go into debt for a vehicle that can be used only two or three times during the week, at the same time. due to the fact that electric mobility continues to be out of reach of the majority of the population.

Added to this is that the renewal rate of the vehicle fleet has also been affected. “The restriction on circulation means that more and more people use their vehicles less. In Bogotá, in particular, a Renault customer drove 10,000 km per year, while today he drives 8,000 km. Today they use it less, therefore they wear out less and it is very likely that they will keep their vehicles longer,” adds Montenegro.

What is expected?

Beyond the adverse macroeconomic outlook, which could be reversed as soon as inflation and with it interest rates stabilize (which is something that is expected to happen next year), the automotive industry is going through a series of its own dynamics that, Roughly speaking, they could imply a before and after.

Specifically in Colombia, the future seems to be in exports. In fact, that is one of the main bets that Renault – Sofasa has, which, in recent years, has directed its efforts to also satisfy the needs of the international market, taking its production to more than ten countries in the region.

Tomorrow is also in electric mobility, so it is imperative that this type of infrastructure be adopted in the national territory, to which is also added the right balance that the Government manages to achieve in terms of international trade with agreements and FTAs. , since many of these agreements open the doors for national production to reach other borders, but at the same time protect the local market.

In short, the figures and experts say that this industry is going through a complex moment, but it does not have to continue. As long as the need for mobility remains valid, this market will also be current, without leaving aside all the challenges that changes in consumer needs and habits are bringing around the world.