Sector Insights. Autos. Sales Performance Remains Strong. Passenger Cars and Light Commercial Vehicles

Transcription

1 Sector Insights Tuesday, May 28, 2013 Autos Sales Performance Remains Strong Following all-time-high sales of passenger cars and light commercial vehicles in 2012, which were stimulated by government incentives, repeating this performance in 2013 is a challenge. The heavy vehicles segment was heavily affected by regulatory changes for pollutant emissions and presented poor results in A strong recovery in sales is expected in 2013, driven by the expectation of good agricultural-crop growth and a financing facility from BNDES (Brazilian National Bank of Development) with lower interest rates. The outlook for agricultural machinery, which performed very well last year, is positive, thanks to the expectation of favorable agricultural figures this year and better conditions from BNDES to finance new equipment. The motorcycle segment, which experienced a sharp decline in 2012, driven by tighter credit conditions for purchases of motorcycles as well as price cuts for passenger cars, is already showing some improvement this year. Delinquency in auto financing increased in 2012, but there are signs of a retreat in Passenger Cars and Light Commercial Vehicles Sales Rebound in April The market for light vehicles, which posted poor sales performance in February and March, ended April with record-high sales: 316,705 passenger cars and light commercial vehicles, up 15% mom/sa and 24% yoy. A total of 1,104,404 light vehicles were sold in the first quarter of 2013, up from 1,017,548 one year earlier. Please refer to the last page of this report for important disclosures, analyst and additional information. Itaú Unibanco or its subsidiaries may do or seek to do business with companies covered in this research report. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should not consider this report as the single factor in making their investment decision.

2 According to auto dealers association Fenabrave, the good performance was boosted by fleet renewals by corporations and rental companies and by a higher number of working days (22 in April 2013). Furthermore, the IPI (tax on industrialized products) tax cut was renewed for passenger cars. The tax rate, at 2% for vehicles with engines up to 1,000 cc., was expected to rise gradually throughout the year to 7%. However, in late March, the government announced that the tax rate would remain at 2% until December. Our forecast models indicate that this change in the IPI will cause a positive impact ranging from 2.3 to 4.7 percentage points in auto sales this year. Vehicle production also rebounded in April, to 301,746 passenger cars and light commercial vehicles, up 3.9% mom/sa and 19.6% yoy (please note that April 2013 had two more working days than April 2012.) Year-to-date, 1,133,778 units were produced, up from 998,492 one year earlier, rising a seasonallyadjusted 13.5%. Strong growth in output was led by the sharp increase in sales in April, caused by the decision to maintain the IPI tax rate at 2%. In 2012, the market for pre-owned vehicles was affected by the reduction in the IPI, which made new vehicles cheaper and more attractive compared with pre-owned cars. Hence, prices for pre-owned vehicles dropped and sales fluctuated sharply. In 2013, as the IPI tax rate rose to 2%, the market for preowned vehicles started to recover. In the first quarter, this segment expanded 5.5% from one year earlier, seasonally adjusted. Sales of imported vehicles started to decline Page 2

3 in mid-2012, reflecting the steep increase in the IPI tax rate (30 percentage points) for part of the segment as well as the IPI tax cut for domestically manufactured vehicles. The tax hike took effect in December 2011, but was not passed through immediately due to the inventories held by importers. Sales fell 6.6% in 2012, compared with the year before. The market for imported vehicles is recovering in 2013, with sales climbing 21.2% mom/sa in April. The improvement is due mostly to the Inovar-Auto Program, which gave OEMs quotas for imports without the additional increase in the IPI tax rate, and the higher rate for cars made in Brazil. Heavy Vehicles The Recovery Started, Following a Weak Year in 2012 Sales of heavy vehicles were quite weak in 2012, influenced by the large volume of purchases and orders in late 2011, anticipating the change in gas emissions regulations that would go in effect in January 2012 and make vehicles more expensive. This move in 2011 ultimately depressed sales throughout 2012, prompting the government to adopt incentive measures for the sector, such as lowering interest rates for purchases of heavy vehicles and buying trucks to renew the Army s fleet. The interest rate in the PSI Finame facility offered by state development bank BNDES for trucks and buses, which stood at 10% p.a. in April 2012, was reduced starting in May 2012 and reached 2.5% p.a. in August 2012, implying negative real interest rates. However, this reduction only had an effect on sales later in the year, and did not prevent a poor result for the sector. In January 2013, the interest rate was raised to the current level of 3% p.a., and should rise to 3.5% in July, still below inflation. The subsidized rate is expected to continue until December this year. In 2013, with subsidized rates and a good agricultural crop, the sector is already recovering. Data from the first quarter of the year reflect this change: 51,354 trucks were sold between January and April, or about 40% of the total sales volume of Trucks In the first four months of the year, truck sales were just 1.2% higher than one year earlier, but 16.6% higher than in the last four months of 2012, seasonally adjusted, showing a clear recovery in the sector. In April, sales stood at 13,541 vehicles, rising 8.5% during the month and 21.6% yoy. Page 3

4 Truck production, which totaled 131,808 units in 2012, an increase of 8.5% mom/sa (40% below the previous year, seasonally adjusted) started 2013 on a strong footing. In April, 18,136 trucks were produced, up 57% yoy and 16.9% mom/sa. In the first quarter of the year, truck production rose 46.2% yoy, seasonally-adjusted. The change over 12 months shows an inversion of the downward trend for the segment. Buses In 2012, 29,518 buses were sold, 15.3% less than in the previous year, sa. In April, 3,033 buses were sold, up 2.7% mom/sa and 33.1% yoy. A total of 11,296 units were sold in the first four months of the year, 6% more than one year earlier, seasonally adjusted. Bus production, which fell by a seasonally adjusted 26.4% during 2012, is showing signs of recovery in 2013 as sales pick up. In April, 3,584 units were produced, in a drop of 1.3% mom/sa, but rising 32.3% yoy. In the first four months of the year, 13,742 buses were manufactured, 52.1% more than one year earlier, seasonally adjusted. Page 4

5 Agricultural Machinery Good Outlook for the Crop Should Sustain Growth in the Sector In the segment comprising agricultural machinery (which like the heavy-vehicle segment takes advantage of a financing facility by BNDES, with negative real interest rates since mid-2012), sales grew 7% during 2012, seasonally adjusted. For the current year, the outlook for a good crop and stillfavorable financing costs should ensure further growth. According to food-supply agency Conab, the 2012/13 crop should be very good, with production expected to reach an all-time high level of 184 million metric tons, or 10.8% more than the previous crop. Such growth is already reflected in sales of agricultural machinery, which, as shown in the chart, are strongly correlated with the value of agricultural production. Sales rose 2.1% mom/sa in April and soared 34.1% yoy. Between January and April, 28,223 units were sold, 32.6% more than one year earlier, seasonally adjusted. However, we point out that the financing facility charged 10% p.a. between January and March 2012, and 7.7% p.a. in April, much higher than the current 3% p.a. In line with this positive scenario for sales, production of agricultural machinery has been rising sharply since the last quarter of In April, production increased 5.7% mom/sa and Page 5

6 25.5% yoy. In the first four months of the year, 32,041 units were produced, up 9.3% from one year earlier, seasonally adjusted Inventories High Inventory Levels at Dealers Inventories stood at 33 days of sales in March and remained at the same level in April, despite the pickup in sales during the month. Inventories remained stable because auto production also increased. The number of days in inventory dropped 11.8% yoy. But these figures are not comparable, as in April 2012 the government had not yet announced the IPI tax break for passenger cars, while interest rates in the Finame facility still stood at 10%. Employment Employment Levels Remain High in the Sector Employment in the auto sector for motor vehicles as well as agricultural machinery is quite high in historical terms. Regarding motor vehicles, following a long period of stability, the number of people working in the segment started to rise in May 2012, boosted by the IPI tax cut for passenger cars. As for agricultural machinery, the number of jobs started to grow sharply in February Page 6

7 Motorcycles After a Difficult Year, the Sector Starts a Slow Recovery in 2013 Steep declines in sales and production of motorcycles took place in The drop was caused by tighter credit conditions and government incentives for car purchases. Overall, 1,646,310 units were sold and 1,690,187 units were produced in 2012, falling 15% and 20.9%, respectively, from the previous year, seasonally adjusted. Still, we point out that the comp base is high, as sales performance was outstanding in For 2013, manufacturers association Abraciclo expects this scenario to be reversed and estimates 3.7% growth in production and 2.4% growth in wholesale sales compared with In April 2013, 139,570 units were sold, sliding 0.7% yoy, but rising 11.1% mom/sa. In the first four months of the year, 523,566 new motorcycles were sold, or 13.7% less than one year earlier, seasonally adjusted. But importantly, sales rose 5.8% from the last quarter of 2012, seasonally adjusted, indicating the beginning of a recovery. Average sales per working day stood at 6,344 units in April. In line with sales figures, motorcycle production is also starting to rebound. In April, 154,670 units were produced, up by 17.9% mom/sa and 6.2% yoy. Between January and April, 536,391 motorcycles were manufactured, falling 18.1% from one year earlier, but advancing 14.5% from the last four months of 2012, seasonally adjusted. Page 7

8 Auto Parts Good Outlook for 2013 The auto parts segment withstood a bad year in 2012, influenced by the decline in the production of trucks and buses as well as the widening deficit in the sector s trade balance. The poor performance was reflected in real revenues for auto parts manufacturers, which dropped 13.9% from For 2013, many factors indicate a recovery: i) improvement in the production of heavy vehicles; ii) the segment comprising light vehicles is still heated; iii) mandatory new safety equipment in new vehicles, and; iv) the Inovar Auto program, which ties IPI tax breaks to investments in innovation and utilization of locally-manufactured parts by automakers. * January and February Page 8

9 Credit Still-High Delinquency Starts to Show Signs of Decline Delinquency 1, which prompted more selectiveness in granting auto loans in 2012, starts to cool down for both financing facilities (CDC) and leasing transactions. According to Central Bank data, between March 2011 and February 2013, delinquency in leasing payments more than 90 days overdue rose 56.8% to 10.2% from 6.5%. In March 2013, overdue leasing payments declined slightly from the previous month to 10%. But despite this positive data, delinquency is at a historically high level. Delinquency in auto loans for consumers, which also increased in recent years, shows a clearer downward trend starting in mid Considering a scenario of declining, but stillhigh, delinquency, the volume of new loans is still low. Regarding leasing transactions, which experience higher delinquency, the credit volume is close to zero. Financing volumes have fluctuated sharply, but remain low. As for the evolution of credit types, according to the association that gathers automakers credit statistics (ANEF), leasing lost the biggest share as an auto purchase modality, narrowing by 36 percentage points in the period. On the other end, vehicle financing 1 Share of the credit portfolio in the National Financial System with at least one installment more than 90 days overdue. Page 9

10 (CDC) grew the most, climbing to 51% in 2012 from 22% in Luzineide Sales Paula Yamaguti Macro Research Itaú Ilan Goldfajn Chief Economist Click here to visit our digital research library. Relevant Information 1. This report has been prepared and issued by the Macro Research Department of Banco Itaú Unibanco S.A. ( Itaú Unibanco ). This report is not a product of the Equity Research Department of Itaú Unibanco or Itaú Corretora de Valores S.A. and should not be construed as a research report ( relatório de análise ) for the purposes of the article 1 of the CVM Instruction NR. 483, dated July 06, This report aims at providing macroeconomics information, and does not constitute, and should not be construed as an offer to buy or sell, or a solicitation of an offer to buy or sell any financial instrument, or to participate in any particular trading strategy in any jurisdiction. The information herein is believed to be reliable as of the date on which this report was issued and has been obtained from public sources believed to be reliable. Itaú Unibanco Group does not make any express or implied representation or warranty as to the completeness, reliability or accuracy of such information, nor does this report intend to be a complete statement or summary of the markets or developments referred to herein. Opinions, estimates, and projections expressed herein constitute the current judgment of the analyst responsible for the substance of this report as of the date on which it was issued and are, therefore, subject to change without notice. Itaú Unibanco Group has no obligation to update, modify or amend this report and inform the reader accordingly. 3. The analyst responsible for the production of this report, whose name is highlighted in bold, hereby certifies that the views expressed herein accurately and exclusively reflect his or her personal views and opinions and were prepared independently and autonomously, including from Itaú Unibanco, Itaú Corretora de Valores S.A. and other group companies. 4. This report may not be reproduced or redistributed to any other person, in whole or in part, for any purpose, without the prior written consent of Itaú Unibanco. Additional information on the financial instruments discussed in this report is available upon request. Itaú Unibanco and/or any other group companies is not, and will not be liable for any investment decisions (or otherwise) based on the information provided herein. Additional Note to reports distributed in: (i) U.K. and Europe: Itau BBA International plc: This material is distributed and authorized by Itau BBA International plc (Itau BBA UK) pursuant to Section 21 of the Financial Services and Markets Act The material describing the services and products offered by Itaú Unibanco S.A. (Itaú) has been prepared by that entity. IBBA UK is an affiliate of Itaú. Itaú is a financial institution validly existent under the laws of Brazil and a member of the Itaú Unibanco Group. Itau BBA International plc registered office is 20th floor, 20 Primrose Street, London, United Kingdom, EC2A 2EW and is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (FRN ). Itau BBA International plc Lisbon Branch and the Overseas Financial Branch located in Madeira are regulated by Banco de Portugal for the conduct of business in those offices. Itau BBA International plc has representative offices in France, Germany, Spain and Colombia which are authorised to conduct limited activities and the business activities conducted are regulated by Banque de France, Bundesanstalt fur Finanzdienstleistungsaufsicht (BaFin), Banco de España and Superintendencia Financeira de Colombia respectively. None of the offices and branches deal with retail clients. For any queries please contact your relationship manager. For more information go to: Itau BBA UK Securities Limited: This material is distributed and authorized by Itau BBA International plc (Itau BBA UK) pursuant to Section 21 of the Financial Services and Markets Act This material is directed solely at Eligible Counterparties and Professionals as defined by the Financial Conduct Authority. The material describing the services and products offered by Itaú Unibanco S.A. (Itaú) has been prepared by that entity. IBBA UK is an affiliate of Itaú. Itaú is a financial institution validly existent under the laws of Brazil and a member of the Itaú Unibanco Group. Itau BBA UK Securities Limited registered office is 20th floor, 20 Primrose Street, London, United Kingdom, EC2A 2EW and is authorised and regulated by the Financial Conduct Authority (FRN494837); (ii) U.S.A: Itau BBA USA Securities, Inc., a FINRA/SIPC member firm, is distributing this report and accepts responsibility for the content of this report. Any US investor receiving this report and wishing to effect any transaction in any security discussed herein should do so with Itau BBA USA Securities, Inc. at 767 Fifth Avenue, 50th Floor, New York, NY 10153; (iii) Asia: This report is distributed in Hong Kong by Itaú Asia Securities Limited, which is licensed in Hong Kong by the Securities and Futures Commission for Type 1 (dealing in securities) regulated activity. Itaú Asia Securities Limited accepts all regulatory responsibility for the content of this report. In Hong Kong, any investors wishing to purchase or otherwise deal in the securities covered in this report should contact Itaú Asia Securities Limited at 29th Floor, Two IFC, 8 Finance Street Central, Hong Kong; (iv) Japan: This report is distributed in Japan by Itaú Asia Securities Limited Tokyo Branch, Registration Number (FIEO) 2154, Director, Kanto Local Finance Bureau, Association: Japan Securities Dealers Association; (v) Middle East: This report is distributed by Itau Middle East Limited. Itau Middle East Limited is regulated by the Dubai Financial Services Authority and is located at Suite 305, Level 3, Al Fattan Currency House, Dubai International Financial Centre, PO Box , Dubai, United Arab Emirates. This material is intended only for Professional Clients (as defined by the DFSA Conduct of Business module) no other persons should act upon it; (vi) Brazil: Itaú Corretora de Valores S.A., a subsidiary of Itaú Unibanco S.A authorized by the Central Bank of Brazil and approved by the Securities and Exchange Commission of Brazil, is distributing this report. If necessary, contact the Client Service Center: * (capital and metropolitan areas) or (other locations) during business hours, from 9 a.m. to 8 p.m., Brasilia time. If you wish to re-evaluate the suggested solution, after utilizing such channels, please call Itaú s Corporate Complaints Office: (on business days from 9 a.m. to 6 p.m., Brasilia time) or write to Caixa Postal , São Paulo-SP, CEP * Cost of a local call. Page 10