BMI has become significantly less optimistic on the medium-term outlook for Peruvian new vehicle sales over the past 12 months. We are now forecasting growth of 32.7% (down from 58% previously) over the 2014-17 period. This will see total new vehicle sales rise to 287,343 units by 2017, made up of 211,551 passenger cars and 75,793 commercial vehicles.
Looking at the most recent new vehicle sales data as this report was being compiled (covering the January-October 2013), we can see that Peru has seen a slowing down in growth from the rapid 27% witnessed in 2012. Indeed, as of end-October 2013, year-to-date vehicle sales were up by 8%, at 168,122, according to figures from the Peruvian Association of Automotive Representatives (Araper). For the full year, BMI is forecasting growth of 9%, to reach 207,952 units.
Looking forward, BMI adopts a slightly more cautious stance on the near-term outlook for new vehicle sales, targeting growth of just 4.1% in 2014, before gaining ground to 9.3% in 2015.
The main reason behind our more measured stance as we enter 2014 is BMI's Country Risk team's view that the economy will struggle to return to the 6%+ growth seen over the 2010-12 period. Already, we have recently downgraded our 2013 real GDP growth forecast, to 4.8% from 5.1%, with economic expansion set to remain largely unchanged, at 4.9%, in 2014.
On the positive side, new mining projects are set to come online over the coming years and investment should pick up, following a more accommodative monetary policy stance taken by the central bank. This should boost demand for new commercial vehicles in particular.
However, with regards to passenger car sales, we believe that the consumer sector will continue to be undermined by the declining purchasing power of the Peruvian sol currency, which had depreciated by almost 10% over the first 11 months of 2013, as international investors have begun to pull out of emerging markets in anticipation of a normalisation of monetary...