What is in this article?:
- Colombia Ready With Program to Prop Up Auto Sector
- Suppliers Also to Benefit
The primary objective of the scheme is to help the domestic industry recover market share from inexpensive imports, notably by slashing tariffs on parts and materials imported for vehicle assembly.
Four automakers account for 99% of local vehicle production.
BOGOTA – Colombia’s struggling automobile sector is anticipating as early as today the launch of a new government program designed to help it follow the successful tactics of its principal competitors abroad.
The primary objective of the scheme, dubbed PROFIA (Development Program for the Automotive Industry), is to help the sector recover market share from inexpensive imports, notably by slashing tariffs on parts and materials imported for vehicle assembly.
However, industry insiders are warning the scheme will do little to tackle the internal and external conditions shackling the sector’s competiveness.
Just two years ago, the Colombian auto industry was riding high. Between 2009 and 2011, sales grew 97.2% to a record 351,012 units, while production swelled 69.3% to 154,261 units, according to statistics compiled from government records by the ANDI, Colombia’s business association.
In 2012, the wave broke, with a 7.3% fall in consumption and a 9.8% drop in production.
While government figures have yet to be compiled, preliminary statistics for 2013 show sales dropped a further 7% and may have ducked below the 300,000 mark. Even more of a concern is the growth in the penetration of imported vehicles, which now account for 67.3% of the market, compared with 51.5% in 2009.
In addition, the industry has been hit by a series of factory closures, the most recent of which, by, will halt all production at its Bogota plant April 30.
The loss is a serious blow.is one of eight automakers with assembly plants in Colombia, and along with , Renault and accounted for 99% of vehicles manufactured locally in 2012, according to the ANDI.
“The automotive industry is in serious trouble,” says Tulio Zuloaga, president of ASOPARTES, Colombia’s auto parts industry association. “Because of high taxes, energy costs and other factors, the sector’s competitiveness is meager.”
One of the central concerns is the industry’s inability to compete with imports, especially from Mexico, which has capitalized on a 1995 Free Trade Agreement with Colombia to claim a 23% market share, according to ANDI.
The Colombia sector has looked to Mexico in search of answers to how to boost competiveness, developing the PROFIA scheme based on Mexico’s PROSEC program, which abolished tariffs on the import of goods and equipment used for manufacturing of vehicles or parts in the country.
“The objective of PROFIA is to provide the automotive sector with a new mechanism to strengthen companies in the domestic market, making relations between the production chain and the government more effective,” says Camilo Montes, head of Colombia’s Ministry of Commerce’s production transformation program.