Industry Trend Analysis - Sovereign Debt Default A Key Risk For Autos - APR 2017


BMI View: T he autos industry faces major risks to its ability to continue operating in the face of a sovereign debt default by the Venezuelan government. We have revised down our forecasts for Venezuelan vehicle sales and production in 2017 as key market players announce cut backs in production in the face of worsening hyperinflation, access to US dollars, and consumer demand.

In 2017, Venezuela's automotive market will sink further into crisis as vehicle sales and production become even more paralysed by a shortage of foreign currency and manufacturing inputs. We forecast vehicle sales to reach 1,703 units, a 43.4% drop from the 3,008 vehicles sold in 2016, while vehicle production will fall 41.8% to a total of 1,659 units for the year. We reaffirm our previous view that the government's 2016/2017 approach to industrial policy in the autos industry will be ineffective ( see 'No Proposed Strategies For Hard Currency Will Succeed ' , February 6 2016) but we now also cite the very real and dangerous risk of the government defaulting on its sovereign debt obligations as a major risk to the autos market.

No Policies Will Prevent Declines In 2017

Production And Sales Still Falling In Tandem
Venezuela - Vehicle Sales And Production Forecasts, Units
f = BMI forecast. Source: National Sources/BMI

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