Industry Trend Analysis - Uncertainty, Not Fuel Prices, To Cause Sales Slowdown - APR 2017

BMI View: The perfect storm of consumer confidence pressures in Mexico has prompted us to revise down our passenger car and light commercial vehicle sales forecast s to 3.6% and 2.1%, respectively. The combination of rising fuel prices as well as economic uncertainty associated with US President Trump's trade policy is having a sharper effect on confidence than we previously anticipated.

In response to sharper than anticipated dips in consumer confidence indicators, we are revising down both our passenger car and light commercial vehicle (LCV) forecasts for 2017. We now forecast passenger car sales to grow only 3.6% to 1.104mn units in 2017, which marks a considerable revision from our previous forecast of 7.1%. For LCVs we have revised down our sales forecast to 2.1% from a more bullish forecast of 6.0% previously. The downward revisions were influenced by the toxic mix of headwinds currently facing Mexican consumers; more specifically, the combination of economic uncertainty created by Trump's anti-free trade agenda and local inflation pressures led by rising fuel prices.

While we had already correctly anticipated that fuel price hikes would damage consumer bullishness ( see ' Sales Strength From Import Ban Outweighs Fuel Cost Risks ' , January 6), we did not fully consider how this drop in confidence would combine with general consumer fears about future economic growth. Overall consumer confidence tumbled in January 2017 following the fuel price hike while consumer plans to purchase a new car over the next two years dropped in parallel ( see chart above).

Confidence Plunge Damaging Autos Sales Prospects
Mexico - Consumer Confidence And Planned Purchases Indices, Jan 2003=100
Source: INEGI, BMI

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