Volvo Invest In Commercial Vehicle Segment


On June 12, the Volvo Group opened its new base of operations in Lurin, Peru. After a US$17mn investment, the facilities will serve as a hub for commercial and after-market activities supporting Volvo, Mack and UD vehicles, Volvo Buses, and Volvo Penta marine and industrial engines. Commercial vehicle (CV) sales In Peru grew 18% y-o-y in the first four months of 2012 compared to the same period last year. BMI forecasts that CV sales will grow at 17.9% in 2012.

Volvo is a market leader in the heavy duty trucks segment, and this new investment will help it support the expansion of its business operations in the country. In 2011, 2,040 Volvo trucks were sold in Peru, a record since Volvo entered the market 50 years ago. 'Our trucks are ideal to address the requirements of Peruvian carriers in the mining and long distance freight segments,' said Rolf Smedberg, managing director of Volvo Peru. BMI forecasts 4.2% growth in Peru's mining sector in 2012, with the industry value reaching US$18.7bn up from US$18.0bn in 2011.

We believe that continued investment in the post-sales market may precede investments in production investments, as in other Latin American markets. Colombia, for example, has seen growth in production facilities that cater for complete knock down (CKD) kits where it once only imported CBUs (see our online service, June 15, ' New FTA To Increase South Korean Investment'); as the market matures, we believe we will see continued development of the production segment. As a larger market and production hub, Brazil has recently mandated minimum local content and production requirements in an attempt to develop local production (see our online service, May 2, ' Brazilian Auto Industry To Benefit From Stimulus Package'); it will be a long time before other Latin American markets can set demands on international auto manufacturers, but we believe that this is a long-term trend.

Growing Industry
Passenger Cars and Commercial Vehicle Sales, CBUs

More generally, we remain bullish about Peru's automotive sector, and believe that it is showing signs of becoming one of the most promising auto growth markets in Latin America. Indeed, Peru's business environment has undergone remarkable progress in recent years, with the country's legal framework increasingly capable of processing the growing outside interest in the economy. We forecast that vehicle sales will grow 26% in 2012; over the 2011-2016 forecast period, we believe that vehicle sales will grow 76%, to 263,747 units.

We have witnessed significantly increasing competition in the market as more international carmakers seek to increase their presence in light of Free Trade Agreements (FTAs). Toyota now has a market share of 17.7% at 13,441 units, up from 16.5% in November 2011. Hyundai has 14% at 10,604 units, up from 13.5%; Kia has 10.5% at 7,999 units, up from 8.8%; and Nissan has a market share of 8.9% at 6,733 units, up from 8.7%. An increasingly competitive autos market will drive down prices and ensure strong sales growth in the future.

This article is tagged to:
Sector: Autos
Geography: Peru