It ends in 2023 and one of the sectors that predicted sales growth at the beginning of the year had to be recalculated on the fly and would end up with red numbers these twelve months. In January, the automotive sector is estimated to close 2023 with a sales increase of between 2% and 3% compared to 2022 figures, revealed Genaro Baldeón, executive president of the Association of Automobile Companies of Ecuador (Aeade). However, the situation a few hours before the end of the year is far from those projections and the sector would end the complicated year with 2% less sales.

According to Aeade figures, in 2022 – from January to November – the sector sold 123,850 new vehicles, while in the same period in 2023 the figure dropped to 123,409 units. Baldeón identifies two phases of the year with different sales behavior in the sector: in the first half of the year sales growth of 11% with 70,120 vehicles sold compared to 63,219 sold in the first half of 2022. However, in the second half it fell 12% from 53,289 to November compared to 60,631 units sold last year.

Vehicle sales fell 16% in November and recorded the first negative balance in 2023

The truck segment was the hardest hit in 2023. It fell 9% between January and November, according to Baldeón.

What was the cause of this slowdown? The head of Aeade explains that the 2% growth projection that the sector had at the beginning of the year went hand in hand with the growth projections of the Ecuadorian economy. However, the national economy slowed down and the growth of the gross domestic product (GDP) stagnated until the third quarter, which decreased by 1.3% in the third quarter, which was reflected in the automotive sector, which decreased in the second quarter.

Baldeón adds to this the insecurity of citizens and difficulties in obtaining loans, pointing out that this year the placement of consumer loans has decreased by 5 percent.

He explains that the performance of vehicle sales reflects the economic perspectives of households (users and potential buyers of private light vehicles) and the productive activity of the country (companies investing in logistics or capital goods, through vehicles specifically for the transport of goods).

“When vehicle sales fall, in aggregate terms, this indicator shows low expectations of the upcoming economic situation of households and companies, either due to uncertainty in maintaining sufficient income to purchase or borrow for a vehicle or due to the high risk of investing when the economic outlook is not encouraging”, analyzes the leader .

Scenarios for importers and installers

The Ecuadorian Chamber of Automotive Industry (Cinae) predicts that 2023 – from January to December – will end with 133,861 units sold, of which 18,939 correspond to vehicles assembled in the country, ending with a market share of 14.1%. These projections, while also showing a slowdown in the sector, reflect a drop of only 0.35% compared to 2022 when, according to their figures, 134,309 cars were sold in Ecuador.

For David Molina, the executive director of Cinaa, it is not yet clear whether this slowdown is temporary and related to the political changes that took place starting in the second half of the year with the death of the cross and early elections. “It always creates an environment of mistrust in the consumer, the change of government also raises the alarm about the permanence or impermanence of jobs in the public sector and this slows down consumption a bit. It is not clear whether this is a temporary problem or a sign of a slightly deeper slowdown.”

Uncertainty and economy affect new vehicle sales, which fell by 6.3% in October.

He states that the industry is already considering three scenarios for the sector in 2024. According to the pessimistic scenario, sales would amount to 126,000 units in 2024, of which 15,600 units will be assembled in the country, which would reduce the market share to 12.4%. The optimistic scenario, adds Molina, would be similar to the current one, with sales of 132,000 units (19,800 closed) and a slight increase in market share that would reach 15 percent.

There is also a conservative scenario, according to which the sector predicts the sale of 129,600 vehicles next year (18,600 closed), which would keep the market share at 14.4%.

Baldeón’s projections for 2024 are not encouraging, as he estimates that sales will fall by 5%, which is more in line with the pessimistic scenario presented by Molina with an average of 127,000 units sold.

However, despite his calculations, the head of Aeade assures that every year car companies try to bring the latest technology to Ecuador. The car market has diversified and new brands entered the country this year. “For this year 2023, we have 123 brands present and by November, more than 600 models available on the market were registered… For the next year, continued growth is expected, basically driven by the companies’ commitment to innovation and facilitating access to new technology cars that consume less fuel, with smaller and more efficient engines and greater connectivity,” says Baldeón.