Image credits: Unsplash
/
News Article

Auto Prices Grow Faster Than Inflation

By Alfonso Núñez | Wed, 12/01/2021 - 17:05

Guillermo Reyes, Assistant Director, Mexican Association of Automotive Distributors (AMDA), announced that vehicle prices had increased by an 8.56 annual percentage rate (APR). Meanwhile, José Zozaya, President, Mexican Association of the Automotive Industry (AMIA), explained that with inflation, materials and consumables are increasing in price, which in turn increases the final price of a vehicle.

 

“Many times, it is not just the increase on (the cost of) the materials but also for transport, in the very logistics. This cost increase reaches the final consumer, everything comes into play,” explained Zozaya.

 

Zozoya also explained that the rise in prices is also influenced by the high costs of freights and containers. Tire prices also rose an average 13.2 percent in Mexico by the end of October due to the shortage of semiconductors and rubber, the latter caused by a leaf disease in Asia. However, Zozoya said that prices are not expected to continue rising throughout the remainder of 2021. He forecasts that the year will close with a total increase in costs close to 8.5 percent.

 

Meanwhile, light vehicles sales saw their worst October in 10 years, decreasing by 9.1 percent, according to AMDA’s latest report. During Oct. 2021 new vehicle sales amounted to 76,640 units, a 9.1 percent decrease. This was the fourth monthly decrease of the year, shortly followed by November seeing the highest inflation rise in 20 years, climbing to 7.05 percent. As Rosales pointed out, inflation limits consumer’s capacity to buy while the ongoing COVID-19 pandemic limits consumer’s access to the vehicle of their choice. The two types of vehicles with the largest decreases in sales are sports cars and luxury models.

 

The latest data collected from AMDA, Jato and Urban Science shows that the automotive financing saw a light recovery from last year, increasing by 12.1 percent. However, the industry has yet to return to 2019 levels when 643,078 vehicles were credited as opposed to the 533,822 this year.

 

Additional factors affecting inflation include a decrease in domestic and foreign demand, production halts caused by semiconductor shortages and increases in the prices of freights and logistics. Data shows that the cost of containers for the Mexico to Asia route increased almost 10 times throughout the pandemic.

 

Zozoya forecasts, as many in the industry do, that 2022 and 2023 will be positive years for the automotive industry. But as the last two years have proved, there is always a chance for unpredicted challenges. While global lockdowns limiting national mobility may seem to have ended, the emerging Omicron variant reminded the world that the virus is ever-evolving.

Photo by:   Unsplash, Ameer Basheer
Alfonso Núñez Alfonso Núñez Journalist & Industry Analyst