Argentina Light Vehicle production: early pandemic recovery or simply recovery?

Light Vehicle output in Argentina attained great heights over the course of 2022 reaching 554,000 units and achieving 23% growth year-on-year. This growth seems to paint a picture of recovery from the supply shortages plaguing the industry, but is there more to the story? Argentina’s pre-pandemic environment is also at play in the growth achieved, as the country faced economic unrest before the widespread impact of COVID-19. With the return to pre-pandemic levels for the South American region not expected until 2025, there is more underneath the surface driving the country’s growth.

The environment prior to the spread of COVID-19 in Argentina was shaped by economic turmoil, volatile market conditions and structural issues begging to be resolved. These overarching issues weakened demand, brought on high inflation and, in turn, falling production volumes.  2019 marked the last ‘normal’ year before the widespread impact of the pandemic, but volumes had already experienced a decline of 29% year-on-year, reaching just 328,000 units.

The two-year recession period impacting 2018-2019 transitioned into a time plagued by the impacts of COVID-19 which promptly forced automakers in the region to shut down plants for extended periods – including Toyota’s Zárate plant which is the largest producing plant in the country. The country (and the world) were faced with uncertain supply, sending production volumes even lower as 2020 volumes declined by 18% year-on-year.

From a distance, 2021 appeared to mark the country’s recovery as volumes surpassed pre-pandemic levels with production output reaching 450,000 units for the year, but in reality, automakers were still working to recover volumes near to those of the pre-recession period as demand started to gradually bounce back.Although production in the country was impacted by supply shortages that remain an issue for automakers globally, there was some easing in 2022.  With this stimulus, Argentina was able to achieve growth of 23% year-on-year, surpassing volumes seen in 2018.

In addition to the lessening severity of supply shortages, automakers including Toyota and General Motors were able to further support growth in the country. Toyota’s recent investment in hiring more workers at its Zárate facility, which houses the Hilux Pickup and SW4 SUV, brought a record year for the automaker as the ever-popular Hilux Pickup continued to dominate the market. Zárate is expected to hold on to its status as one of the largest Hilux production facilities in the world throughout the forecast – the model is also produced in Thailand and South Africa.

General Motors introduced the Chevrolet Tracker SUV in Argentina in 2022 (years after it was launched in Brazil) at its Rosario plant, contributing 12,000 units for the year. Following the launch, the return of the second shift at Rosario was announced, which should allow the model to double its volumes this year. The model will also provide steady export volumes to Colombia as well as Brazil, freeing up capacity at the São Caetano do Sul plant, which already produces the model. The available capacity at São Caetano do Sul will be utilised to build the Chevrolet Montana Pickup.

For the full-year 2023, we anticipate Light Vehicle output to continue to rise, although production risks remain due to the lingering global supply shortages as well as the upcoming Argentine presidential election. Growth in 2024 is anticipated to be flat as several models, including the Renault Sandero and General Motors’ Chevrolet Cruze to name a few, are expected to be dropped, as the market awaits the arrival of new model launches in other segments. From there, although risks remain as the economy continues to evolve, Argentina is anticipated to continue to flourish as demand is expected to gradually improve throughout the forecast.