Saturday, July 12, 2014

Venezuela: Auto Indistry Declines Some 83% in the First Six Months of 2014

According to The Latin American Tribune, Venezuela’s auto industry is facing an “unprecedented crisis” after vehicle sales plunged 83% due to manufacturers’ inability to access US dollars they need to purchase imported components, the National Chamber of Commerce for Auto Parts (Canidra) said.

Assemblers sold just 6,200 vehicles in the first quarter of 2014, a steep drop of 83% compared to the same period last year, while auto-parts importers have reported a similar decline in sales, Canidra President José Cinirella said in an interview with private TV network Televen.

Cinirella said “it’s no longer just the auto-parts sector that’s in crisis, but the entire automotive sector,” a scenario “unheard of in the past 50 years.”

COMMENT: Once again, Venezuela has seen, as have so many other failed Socialist regimes in the past, that similar regimes are destined to fail when they go it alone in the global marketplace.

Cinirelli said the situation stems from “problems acquiring foreign currency, paying off debt, and repatriating dividends and capital” due to strict currency controls.

In 2003, then-President Hugo Chávez, a self-proclaimed Socialist who died last year, instituted those controls to stem capital flight and they have continued under his successor, Nicolas Maduro, who introduced a three-tier exchange system.

Three of the Venezuelan auto industry’s seven plants – facilities run by Chrysler, Iveco and Mack – have been shuttered entirely, while Toyota assembled just 100 vehicles in June following a three-month production halt.

In the first six months of 2014, MMC Automotriz, the Venezuelan assembler for Mitsubishi and Hyundai-brand vehicles, was the production leader with 2,097 units, followed by General Motors, with 1,694 units.

The local unit of Turin, Italy-based industrial vehicle manufacturer Iveco was at the bottom of the list with just 39 vehicles assembled.

The auto industry had been “the pride of Venezuela because we were the fourth-biggest” in the Americas, Cinirella said.

Automakers with operations in Venezuela, whose government has a monopoly on access to dollars, have repeatedly complained about an inability to acquire foreign currency to import supplies.

Due to those restrictions, several automakers have reduced production levels to a minimum, and even suspended assembly operations.