LIMA, Peru – Peru is not considered a big player in new-vehicle sales in this part of the world, yet passenger-car deliveries jumped 53% through the year’s first seven months, bucking the trend in the region.

Market growth throughout South America is expected to slow for the remainder of 2010 as several countries continue to recoil from sharp declines last year, although Brazil, the region’s biggest car market, still is seeing strong demand.

The latest data available from the Association of Automotive Representatives of Peru, one of the country’s two largest auto industry trade groups, shows 64,948 new cars were sold in Peru through July.

Toyota Motor Corp., the country’s long-standing sales leader, delivered 14,899 units in the first seven months, for a 22.9% market share. It was followed by Hyundai Motor Co. Ltd. with 8,389 and a 12.9% share, Nissan Motor Co. Ltd. with 6,378 for a 9.8% stake and Kia Motors Corp. with 5,620 and an 8.7% share.

Suzuki Motor Corp. sold 3,628 units for a 5.6% share, followed by General Motors Co.’s Chevrolet brand with 3,415 for a 5.3% stake and Volkswagen AG with 2,850 for a 4.4% share.

Total light-vehicle sales in Peru, including cars, station wagons, multipurpose vehicles and SUVs, jumped 61% from year-ago through July.

The Automotive Association of Peru (AAP), the country’s other main auto-trade group with about 161 dealers, importers and other auto-related organizations, predicts sales of passenger vehicles this year will top 140,000 units, compared with some 77,000 in 2009.

There are an estimated 1.5 million vehicles in Peru.

“In the last two years, there has been an explosion of development in this sector,” Alfonso Florez, a sub-manager for AAP, says during an interview with Ward’s here at the group’s headquarters. New-car sales are “breaking all records,” he adds, noting several of the country’s most popular models are out of stock.

Recent findings by research-firm Aroq Ltd. shows combined sales in South America’s five-largest markets: Brazil, Argentina, Venezuela, Columbia and Chile, dipped an estimated 3%, or 3.7 million units, in 2009.

A modest 1% rise in combined sales from the five countries is expected this year, though analysts say growth could be as much as 6% if the global economy continues its trend toward recovery.

Effects of the worldwide downturn were seen last year in regional markets such as Argentina, where annual vehicle sales dropped 10%, and Venezuela, where deliveries barely topped 100,000 units in a country that sold a record 450,124 vehicles in 2007.

Peru’s sales also have been on something of a roller coaster, soaring to 51,017 units in 2007, falling to 92,490 in 2008 and dropping again last year.

AAP General Manager Enrique Prado says 2008 was a record year, during which the auto industry imported “more cars than we expected to sell.” The resulting glut, paired with consumer uncertainty about the global economic slowdown, led to fewer purchases.

But Prado notes Peru’s auto market remained buoyant through the latest economic malaise thanks to government initiatives to bolster the economy; greater industry and business oversight; and improved international commerce, particularly with the country’s top-two trading partners, the U.S. and China.

Two-way trade between the U.S. and Peru totaled more than $12 billion in 2008. That included $6.2 billion in exported goods to Peru, $243 million of which were automobiles.

During the same period, bilateral trade between China and Peru topped $7.5 billion, according to the Chinese government’s Xinhua news agency. In 2006, four Chinese brands debuted in Peru: Great Wall, Hafei, Geely and FAW.

Peruvian consumers today can choose from some 60 Chinese-specific vehicles and at least one joint-venture model, the Chevrolet N200 minivan, one of the latest products of the long-standing SAIC-GM-Wuling Automotive Co. Ltd. partnership. The N200 debuted in Lima in summer 2008.

“It was Japan 30 years ago, Korea 20 years ago and now its Chinese business,” Prado says of the new-car industry.

Through the latter part of the 20th century, Peru played host to an array of assembly plants operated by several of the world’s major auto makers, including Ford Motor Co., GM and the former Chrysler Corp.

However, decades of martial rule that began in the mid-1960s and ended in the early 1980s created a hostile industrial environment, pushing foreign auto makers away and leaving the country fully dependent on imports.

At one point, choices were so limited, “You could only buy three (brands) here: Toyota, Nissan and Hillman, which was a Chrysler product,” Florez says.

The auto market suffered one of its biggest and lasting setbacks during the reign of Alberto Fujimori, who was Peru’s president from 1990 to 2000. In an effort to jumpstart the economy, he slapped high tariffs on new vehicles, eased regulations and opened the market to used imports.

The flood of used vehicles was an immediate game-changer, with substantial tax benefits, quickly eclipsing sales of new vehicles.

Recent statistics from SUNARP, Peru's state agency for public records and information, suggest nationwide sales of second-hand cars currently number about 900 a day, on track to top 260,000 this year, nearly twice the best estimates for new-vehicles.

The onslaught of used cars – a majority of which today are believed to be older than 15 years – deeply has impacted Peru’s environment.

Recent research by the Institute of Peruvian Studies reveals the metropolitan Lima area suffers from the worst air pollution in Latin America, despite heightened clean-up efforts. The study asserts an estimated 80% of the air’s contaminants can be traced to the city’s automobiles.

A separate investigation published by the daily newspaper El Comercio shows oil companies producing fuel in Peru have a long history of avoiding compliance with facility and operational guidelines set by the government.

AAP and other industry observers contend the auto industry’s future hinges on the government’s ability to reassert limits on used-vehicle imports and wrest back regulatory control of the market, which in turn needs to become more accessible to consumers.

But after so many years of unbridled commerce, car buyers might not understand the need for change, Prado says.

For instance, it has proven difficult for would-be car buyers to recognize new models – once with sticker prices far beyond the means of average consumers – now are highly competitive with used cars and more fuel-efficient and economical.

Florez points out the market’s paradigm has changed. “Now you can buy a brand new car for the same price you’re buying (a used car) which risks your life.”

In fact, the federal government has announced plans to phase out all used-car imports this year. There also are efforts to enforce licensing requirements, improve emissions standards and establish greater consumer protections.

Equally important, Interbank Group, one of Peru’s leading credit banks, has announced plans to extend auto loans this year to 20,000 low-income car buyers.

“In the last two years, we have been in a permanent campaign with the government, with all the ministers, with the press and with the Congress,” says Prado. “The automobile industry in Peru has to grow.”

With the government’s stepped up leadership and cuts to used-car imports, it appears Peru’s new-car industry finally may have a chance to bounce back.