Renault has announced a USD100-million investment in its plant in Cordoba, Argentina. South America remains a significant market for the brand, despite the region's current malaise, and Renault will continue to invest there, as other leading automakers have done.
IHS Automotive perspective | |
Significance | Renault has announced a USD100-million investment in its plant in Cordoba, Argentina, to support production of three additional models there (Logan, Sandero, and Sandero Stepway). Separately, Renault has announced the timing of refreshed versions of three models in Brazil, and the CFO of Renault in Mexico has indicated a production facility in Mexico is being considered. |
Implications | Latin American markets are significant ones for Renault, as the brand is the fifth-best-seller across the continent and the fourth-largest producer in South America, separate from Alliance partner Nissan. South America accounted for 17.5% of the Renault brand's global production in 2014. |
Outlook | Renault has signalled the continued significance of the Latin American market, despite the current problems for Brazil and Argentina. Despite the struggles in Argentina's and Brazil's automotive markets, each is forecast for future growth; Renault's sales and production in each market are entrenched and keep the company in the top 10 in both markets. |
Renault has announced new investment in its plant in Cordoba, Argentina. The company will invest USD100 million to introduce a new vehicle platform and to build the Logan, Sandero, and Sandero Stepway at the facility. According to a company statement, the addition of the new platform guarantees continuing production of Renault vehicles in Argentina, and allows for the addition of new models in the medium and long term. In a company statement, Renault Argentina chief executive officer Thierry Koskas said, "Argentina is a key location for the Renault group as far as the development of its production strategy and sales growth in the Americas region are concerned. The aim is to maintain this expansion and also reinforce the brand's footing in the country." Renault says that the investment amount will be deployed over a period of 20 months, and in five key areas: development of its local supplier network; conversion and modernisation of equipment; research and development; staff training; and modernisation of the paint shop. Production of the three new models is scheduled to begin in mid-2016, with sales due to begin in the fourth quarter of 2016.
Separately, Renault Mexico CFO Magdalena Lopez has indicated the company is looking at building a new assembly plant in that country as well, report local media. Lopez said, "We want to be present here [in Mexico], of course, but at the moment nothing has been defined yet, as it has to be decided what to do with this production, make sure where the target markets are, not only the local market." Renault reportedly imports vehicles from Colombia, Brazil, South Korea, and Spain to meet its Mexican demand.
In addition, Renault announced yesterday (11 March) plans to begin sales of the refreshed Sandero minicar in Brazil in the second half of 2015. In Brazil, the Sandero will be offered with a manual gearbox, improved suspension system, and 2.0-litre flex engine. In April, Renault will also introduce an updated Duster sport utility vehicle (SUV), which is known as Sandero Stepway in some markets. The Oroch pick-up truck is being introduced as well and is due on sale at the end of 2015, which follows the introduction of the Oroch concept at the 2014 São Paulo Motor Show (see Brazil: 30 October 2014: São Paulo Motor Show 2014: Renault reveals Duster Oroch pick-up concept).
Outlook and implications
Renault's plans indicate the continued significance of the Latin American market, despite current difficulties in Brazil and Argentina. Despite the conditions in Argentina's and Brazil's automotive markets, each is forecast for future growth, while Renault's sales and production are entrenched in each market and the automaker remains in the top 10 in both markets.
IHS Automotive forecasts that Argentina's sales will recover from a low of about 499,000 units in 2016 to more than 724,000 units by 2021. Brazil is forecast to recover from a low of 3.25 million units in 2015 to 3.97 million units in 2021. Renault was ranked fifth in Argentina in terms of sales in 2014 and was ranked sixth in Brazil.
The current state of Argentina's automotive industry far from healthy (see Argentina: 5 March 2015: Argentine automotive industry continues decline as sales fall 19.6% y/y in February), with production scaled back by many automakers in late 2014 and early 2015, but the market is expected to improve and investment continues (see Argentina: 9 February 2015: Mercedes-Benz invests USD50 mil. to add Vito to Argentine production – reports, Argentina: 30 October 2014: Honda confirms investment in HR-V production, and Argentina: 10 July 2014: GM invests, Renault and Iveco suspend plant operations in Argentina – reports).
In the short term, the market's problems have caused Renault's production at Cordoba to fall from 117,532 units in 2013 to 80,878 units in 2014. Ahead of the latest announcement, IHS Automotive forecast a decline to about 31.320 units in 2016, on decreases of the Clio, Fluence, and Kangoo, which are currently produced there. The Logan and Sandero use Renault's B0 platform and are also built in Brazil. These products received a mid-cycle change in 2014 globally, and the new products are being rolled out in Brazil in 2015. These new products are not due to move to a new platform until 2020. New generations of Fluence and Kangoo are forecast to go into production in Cordoba in the first half of 2017, though a new Clio is not currently forecast. IHS Automotive also forecasts a B-SUV for the Cordoba plant in 2019. Renault has previously announced investment in its Brazilian facilities through 2019, to support production of new models there (see Brazil: 18 April 2014: Renault announces further Brazilian investment).
In relation to the possibility of Renault investment in production in Mexico, the company's global strategic alliance partner, Nissan, is already a strong producer in Mexico, with plans for expansion at its Aguascalientes plant. In Mexico, Nissan is the highest-volume producer and top-selling brand (see Mexico: 11 March 2015: Mexico's light-vehicle sales grow 22.0% y/y in February, exports increase 12.6%, production up 14.0%). Most vehicle production in Mexico is exported, and it would be expected that a Renault plant would follow that pattern. However, most of Mexico's production is exported to the United States, and Renault currently has no presence in the US. Renault's sales in Mexico over the first two months of 2015 reached 4,136 units, up 13.0%. Mexico encourages export production, having signed more than 40 free-trade agreements with various countries. Brazil and Mexico, however, have recently agreed to continue a quota system for automotive trade between them, which is set to last until March 2019 and is scheduled to be followed by a free-trade arrangement (see Brazil - Mexico: 10 March 2015: Brazil and Mexico agree new four-year period of vehicle trade quotas). Argentina has a similar quota arrangement, due to end in mid-2015, and it is uncertain if Argentina will also insist on continuing the quota system.