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Colombia

Colombia
Automotive report
(Forecast closing date: November 18th 2010)
New passenger car registrations, international comparison
('000) Colombia US Japan China Germany
Source: Economist Intelligence Unit.

2006 a 2007 a 2008 a 2009 a 2010 a 2011 c 2012 c 2013 c 2014 c 2015 c 164 218 155 119 b 154 b 172 194 219 246 274 16,948 16,505 16,090 13,195 10,346 b 11,799 12,739 14,210 15,068 15,923 4,748 4,642 4,400 4,228 3,924 4,267 4,445 4,572 4,633 4,696 3,845 5,073 6,300 b 6,760 b 10,351 b 12,004 13,039 14,583 15,844 17,318 3,319 3,468 3,148 3,090 3,781 b 3,149 3,234 3,345 3,414 3,511

a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts.

Overview

Colombia is the fifth-largest car producer in Latin America, behind Mexico, Brazil and Argentina, but is also a net importer. Passenger car stock is estimated at 59.5 per 1,000 in 2009, lower than that in most other Latin American countries, particularly Argentina (164), Mexico (164), Chile (113) and Brazil (111). The automotive industry represents an estimated 6.2% of GDP, with more than 25,000 people employed in car assembly and around 1,000,000 in auto parts production, according to Proexport (the governments export and foreign investment promotion agency). The Ministry of Transport estimates that the total stock of automotives was over 5.39m at end-2008. According to research published by the Asociacin Nacional de Empresarios de Colombia (ANDI, Colombias national association of entrepreneurs), installed capacity was 280,000 vehicles per year, compared with estimated local production of more than 91,118 (down from 110,766 in 2008 and 183,721 in 2007). Exports peaked at nearly 68,000 units in 2007 but declined sharply in 2008 (to 25,600 units) and in 2009 (to fewer than 5,400 units) owing to the restrictions imposed on Colombian goods by the governments of Venezuela and Ecuador (the main export markets). Imports accounted for 57% of sales in 2008 but this share declined to 53% in 2009. Major exporting countries to Colombia include Japan, the US, South Korea and Venezuela. Colombia's vehicle sales are highly correlated with overall economic growth. After a boom in 2004-07, sales weakened from early 2008 and fell by 13% in the year as a whole and by an additional 16% in 2009, as the local economy felt the impact from both monetary tightening and the global financial crisis. Auto sales have rebounded in 2010, growing by around 39.3% year on year in JanuaryAugust as a result of the economic recovery and the strong peso, which boosts purchasing power. The Economist Intelligence Unit forecasts that sales will rebound by 30% in 2010 as a whole, and will average 12% annual growth in 2011-15, thanks to the recovery of the domestic economy and improved access to financing, together with the relatively strong peso. Trade agreements and taxation policy will keep import and tax tariffs low for economy-sized vehicles. A recovery of exports to Venezuela and Ecuador will proceed gradually but the

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economies of both countries will remain relatively weak, hitting overall sales. Government regulation will have mixed effects on the demand for commercial vehicles. Motorcycles will remain an attractive alternative to cars, owing to costeffectiveness. Export promotion will foster the production of parts for automotives, but this activity will remain affected by contraband and theft.
Income and demographics
Nominal GDP (US$ bn) Population (m) GDP per head (US$ at PPP) Private consumption per head (US$) No. of households ('000) No. of households with annual earnings above US$5,000 ('000) No. of households with annual earnings above US$10,000 ('000) No. of households with annual earnings above US$50,000 ('000) No. of households with net wealth over US$1m ('000)
Source: Economist Intelligence Unit.

2006 a 2007 a 2008 a 2009 a 2010 a 2011 b 2012 b 2013 b 2014 b 2015 b 162.8 c 207.5 c 243.5 c 233.3 c 287.5 312.6 339.2 366.0 394.6 428.0 44.4 c 45.0 c 45.7 c 46.3 c 46.9 47.6 48.2 48.8 49.4 50.0 7,818 c 8,479 c 8,775 c 8,805 9,127 9,538 10,031 10,660 11,392 12,183 2,377 c 2,977 c 3,405 c 3,228 c 3,846 4,150 4,468 4,810 5,161 5,538 12,369 12,716 13,045 13,370 13,703 14,044 14,394 14,752 15,120 15,491 6,988 3,145 136 0 8,275 4,300 216 0 9,191 5,243 298 0 9,555 5,548 324 0 10,530 6,718 464 0 11,062 7,299 542 0 11,535 7,793 612 0 11,992 8,264 683 0 12,464 8,760 764 0 12,956 9,293 861 0

a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts. c Actual.

Passenger vehicles

Colombia houses several multinational automotive plants that assemble cars from imported components, but the three largest account for 97% of production, according to ANDI. Despite this concentration, competition is intense and margins are low, and this trend is likely to continue over the forecast period, especially given that the subdued economic performance in both Venezuela and Ecuador will keep exports low relative to production. The domestic car market has recovered strongly from the recession of 2008-09, but we expect growth in car registrations to slow gradually during 2011-15, trailing behind that achieved during the boom of 2004-07.
2006 a 54.0 b 163.6 34.1 2007 a 57.2 b 218.5 33.6 2008 b 58.8 154.9 -29.1 2009 b 59.5 118.8 -23.3 2010 b 61.0 154.5 30.0 2011 c 62.7 171.6 11.1 2012 c 64.9 194.1 13.1 2013 c 67.5 219.1 12.9 2014 c 70.4 245.6 12.1 2015 c 73.9 274.1 11.6

Passenger car registrations

Passenger cars (stock per 1,000 people) Passenger car registrations ('000) Passenger car registration growth (%)
Source: Economist Intelligence Unit.

a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts.

Demand. The passenger vehicles market will remain dependent on domestic economic growth, disposable income and relative prices. Strong GDP growth in 2004-07 led to booming unit sales of new passenger vehicles, which reached a historic peak of 218,500 in 2007, according to the Departamento Administrativo Nacional de Estadstica (DANE, the national statistics bureau). As GDP cooled rapidly in 2008 and 2009 passenger car sales declined sharply, but sales are up strongly in 2010, by 31% year on year in January-September, as the economy recovers. We expect the passenger car market to expand by an average of 12.2% per year in 2011-15, as economic growth averages around 5%, confidence

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improves and the peso remains strong, particularly in real terms. This forecast is based on the fact that a growing population and the need to replace an ageing stock of vehicles coincides with the pick-up of GDP growth, which, in a context of low inflation and subsiding credit restrictions, will allow real household incomes to recover. Nevertheless, after the strong rebound in 2010, sales growth during the rest of the forecast period will be lower than during the 2004-07 boom (when growth averaged 36% a year), dampened by still-high unemployment rates and potentially rising taxes (which will reduce disposable income); and restrictions on the circulation of private cars and high relative petrol prices (which together deter the use of vehicles, although the former factor will help to underpin sales of used private cars). In 2009 cars accounted for 55% of total automotive sales, sports utility vehicles (SUVs) for 15%, taxis for 10%, pick-ups for 9% and vans for 3.5%, according to Econometra, a private think-tank. These shares were relatively unchanged in January-September 2010, although SUVs increased their market participation to 18% and cars declined to 54%. Taxation policy favours the purchase of smaller, cheaper models over luxury automotives. Demand for smaller private cars and taxis will be supported by differential rates of value-added tax (VAT): a higherthan-standard rate is payable for vehicles with an engine capacity of more than 1.4 litres and four-wheel drive, and a lower rate applies to cars with engines smaller than 1.4 litres. Imported vehicles with a free-on-board (FOB) cost of more than US$30,000 are liable for a higher rate of VAT (35%) than those under that threshold, which are charged 16% (for pick-ups, taxis, trucks and buses), 20% (for SUVs) or 25% (for cars). Higher relative fuel prices will continue to encourage buyers to choose compact cars over luxury vehicles. However, a very small (but rapidly rising) segment of the high-income population will underpin pent-up demand for luxury cars and SUVs, although much stronger growth will be prevented by still-high theft rates in the main cities. Nevertheless, we assume that overall public security conditions will remain stable, avoiding a return to the situation of the early 2000s in which guerrillas targeted owners of luxury cars for kidnapping and stole SUVs for transportation in the rural or jungle areas that they dominated. Low spending on automotive replacements over a number of years has left Colombia with relatively old vehicle stock, which will continue to encourage demand for automotives. The high altitude and steep topography of much of the road network reduces the average working life of vehicle engines, increasing the expenditure needed to compensate for depreciation. Vehicle sales are extremely concentrated in urban areas. According to Econometra, more than 80% of total sales take place in the five largest cities: Bogot (the capital), Medelln, Cali, Bucaramanga and Barranquilla. These cities accounted for 84% of sales in 2009 and 83% in January-September 2010. We do not expect changes in this pattern over the forecast period. Imported vehicles gained further market share in 2003-07 as the currency strengthened against the US dollar and accounted for 57% of total automotive sales in 2007. The period of peso weakening that followed the global economic and financial crisis of 2008 materialised in a slight loss of market share for imported automotives. However, as the currency began to recover and

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appreciate from the second quarter of 2009, the relative prices of imported vehicles declined and their market share has risen again in 2010 (to 62% in January-September, compared with 53% in 2009 as a whole). As we expect that the peso will remain stable (and historically strong) in the short-to-medium run, we expect the share of imported automotives will be around 60% for most of the forecast period. Import duties are scheduled to continue to fall as a result of further trade liberalisation policies. The market for used cars is estimated to be 220,000-260,000 vehicles a year. This ratio may have been lower in 2009, however, owing to the domestic economic slowdown and increased credit restrictions (some market participants estimate the market at 200,000 units last year). Only 15% of used cars are sold through formal channels (dealerships). Better access to credit (at low interest rates) and falling prices relative to new cars (as the currency was overvalued) helped to propel sales of used cars in 2005-08. After the slowdown in 2009, these trends should continue during the forecast period. As GDP growth gains strength in 2012-15, credit improves and the peso remains stable, the relative price of both new and used cars will decline somewhat, further fostering sales growth. Pricing. Relative automotive prices will be generally stable during the forecast period, mainly as a result of real exchange-rate trends. The high interest rates and increasing risk aversion on the part of lenders in 2008-09 will continue to reverse gradually during the forecast period, increasing availability for financing.
Item Low-priced car, 900-1299cc (low) Low-priced car, 900-1299cc (high) Compact car, 1300-1799cc (low) Compact car, 1300-1799cc (high) Family car, 1800-2499cc (low) Family car, 1800-2499cc (high) Deluxe car, 2500cc upwards (low) Deluxe car, 2500cc upwards (high) Yearly road tax or registration fee (low) Yearly road tax or registration fee (high) Cost of a tune-up but no major repairs (low) Cost of a tune-up but no major repairs (high) Annual premium for car insurance (low) Annual premium for car insurance (high) Price (US$) 18,842 22,269 35,413 45,283 59,368 62,443 130,193 168,632 1,224 2,159 223 298 1,254 3,100 % of monthly personal disposable income 10,656 12,595 20,028 25,610 33,577 35,316 73,633 95,373 692.3 1,221 126.2 168.3 709.1 1,753 Affordability rank 47 out of 58 47 out of 58 51 out of 58 49 out of 58 50 out of 58 48 out of 58 49 out of 58 46 out of 58 52 out of 52 51 out of 52 51 out of 58 47 out of 58 45 out of 58 47 out of 58

Note. Affordability rank: for each country the price of an item as a percentage of monthly personal disposable income is calculated. Countries are ranked according to these percentages. The most affordable country will have the lowest percentage and be ranked first.

Supply. The market for passenger vehicles (cars, SUVs and vans) has traditionally been dominated by three locally-based companies that import completely knocked down (CKD) material for assembly: GM-Colmotores, a subsidiary of General Motors (GM, of the US); Sofasa, a subsidiary of Renault (France); and Compaa Colombiana Automotriz (CCA), a subsidiary of Mazda
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(Japan). Although there are now eight assembly operations in total, these three still account for 97% of production, according to ANDI. Local assemblers use Colombia as a base for exports to the Andean region and import some models from neighbouring nations to broaden their supply. Domestic automotive exports to Andean markets have traditionally been volatile, however, and they deteriorated drastically in 2009 owing to import restrictions and weak demand from Ecuador and Venezuela. Ecuador increased its effective import tariffs in early 2009 but this was overturned before the end of the year. Venezuela has maintained a de facto embargo on all Colombian imports since last August, but this is expected to be eased in early 2011. In the domestic market, the market share of the three biggest assemblers has been eroded by trade liberalisation since the early 1990s, and since the start of the 2003-07 domestic economic boom they have struggled to reach 50% of the market. Their market share fell to 47% in 2009 and to 40% in January-September 2010, according to Econometra. The trade liberalisation policies have increased the choice of makes to over 40one of the most diverse in Latin Americaand prompted a rapid rise in imported vehicles, led by Asian carmakers such as Hyundai (South Korea), Toyota (Japan) and Kia (owned by Daewoo, South Korea). Since 2004 Hyundai has displaced CCA-Mazda as the third-largest provider of new passenger vehicles, and in 2009 Kia matched CCA-Mazdas market share. Aggressive pricing has also led to rapid growth in sales from Chinese car makers, which have won an estimated 10% of the market through alliances with established dealers in Colombia.
Colombia: vehicle production
Passenger cars 80 70 60 50 40 30 20 10 0 2004 05 06 07 08 09
39.7 51.9 45.2 34.1 34.6 3.2 68.0 3.5 5.4 4.2 4.1

('000 units)

Light commercial vehicles

5.6

Source: International Organisation of Motor Vehicle Manufacturers.

Trade liberalisation will continue to trigger changes in the domestic market structure. According to Econometra, GM-Colmotores maintained its historical leadership in 2009, with a 36% share of the automotive market. It was followed by Sofasa-Renault (15%); Hyundai (13%); CCA-Mazda (6%); Kia (6%); Nissan of Japan (4%); and Ford (3%). In the first nine months of 2010 only Kia and Nissan gained market share, with their shares increasing to 8% and 5% respectively, while the other big retailers lost ground to Chinese companies. GM-Colmotores operates through the Chevrolet brand and dominates the lower end of the market, selling a combination of cheap locally-produced cars and imported models from Venezuela, Ecuador, Japan and the US. In particular, it assembles Suzuki-based models locally and sells them as cheap Chevrolets. After falling by

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16% in 2009, GM-Colmotores's unit sales have rebounded by 21.4% year on year in January-September 2010, but this is below the total growth (of 31%) in the period. The troubles of the big three US auto-makers (Chrysler, GM and Ford) in the US have not had major implications in Colombia. We also do not foresee significant changes in GM-Colmotores or the distribution of Ford models, currently in the hands of CCA. The commercialisation of Chrysler vehicles is negligible (less than 2% of total sales in 2009 and early 2010). Import competition, principally from China, will continue to exert pressure on the margins of local assemblers, despite their efforts to modernise and improve efficiency. The total share of imports in total new passenger vehicle sales could be boosted if the exchange rate were to strengthen further than we expect in 2011-15. The free-trade agreement (FTA) signed with the US in 2006 is likely to be ratified in 2011, although there is a risk that it will be delayed further. The treaty will only reduce tariffs for SUVs immediately upon ratification, and foresees gradual liberalisation (up to ten years) for other vehicle categories. The trade agreement between Colombia and the Mercado Comn del Sur (Mercosur, the Southern Cone customs union between Argentina, Brazil, Paraguay and Uruguay, with Chile and Bolivia as associate members) includes the gradual liberalisation of automotive import tariffs between 2010 and 2019. Lower tariffs will foster the importation of Brazilian automotives in particular. In the meantime, gradual trade liberalisation with Mexico, which started in 2007, is expected to be completed by 2011, prompting Mexican automotives to continue gaining share in imports. Automotive distribution is in the hands of independent dealers appointed by automotive companies, which operate under commercial strategies established by the assemblers. Colombia is considered to have the second-most open regime for concessionaires in the region, after Chile. Competition and increasing buyer awareness will help to improve sale and post-sale customer service from concessionaires. The use of alternative distribution channels such as the Internet, which is still in its infancy, will remain marginal, but will continue to grow. Local assemblers and many importers provide financing to final buyers, but credit availability will increase only later in the forecast period, as consumer and lender confidence improves on the back of recovering GDP growth. Car theft has declined compared with the rates at the beginning of the decade, but will remain an issue. According to the Centro de Investigaciones Criminolgicas (the centre of criminal investigations), 21,482 vehicles were stolen in 2009, representing a 9% increase on 2008. In January-August 2010, 13,257 vehicles were stolen, down by 5.1% compared with the year-earlier period. Of the total, 61% were motorcycles and most of the theft occurred in the major cities (Bogot, Medelln and Cali). Environmental pressures Colombia is a net exporter of crude oil but a net importer of petrol, because of limited processing capacity. We forecast that world oil prices will gradually rise in the medium term, whereas domestic petrol prices will remain relatively high as the government no longer subsidises consumption. The tax regime will continue to favour the demand of fuel-efficient vehicles. The use of vehicles

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propelled by alternative fuel sourceschiefly natural gaswill continue to increase but will remain a small share in comparison with petrol users. Petrol prices for end-consumers had traditionally been subsidised but in 2006 the government announced a gradual dismantling of the subsidies and the intention to allow domestic prices to fluctuate in line with international levels. This plan was originally scheduled for completion by mid-2009 for petrol and by mid-2010 for diesel, but owing to surging world oil prices between 2007 and mid-2008, its implementation was postponed for a few months in order to avoid inflationary pressures stemming from rising petrol costs. In December 2008 the government established a stabilisation fund for petrol prices as a tool to substitute its subsidies-elimination policy. Accordingly, the domestic price of petrol was kept in reference to the international oil price prevailing in July 2008 (above US$130/barrel), where it had been frozen to keep inflation under control, and the difference between this and the international price has been saved. (This implied a de facto elimination of the subsidies and a contribution from consumers as world oil prices fell during the first quarter of 2009, but the domestic price remained frozen.) Amid rising world oil prices since April 2009, the government kept domestic petrol prices unchanged for most of that year, but has been gradually increasing them since December in order to match the international price eventually. Demand. Demand for smaller private cars and taxis has been stimulated by differential rates of VAT: a higher than standard rate is payable for vehicles with engines larger than 1.4 litres and four-wheel drive, and a lower rate applies to cars with engines of 1.4 litres or smaller. High fuel prices have also helped to encourage buyers to choose compact cars over luxury vehicles. The importation of luxury cars is further discouraged by a VAT rate of 35%. In March 2009 the governmentthrough the Banco de Comercio Exterior de Colombia (Bancoldex, Colombias foreign trade and development bank)set up a Ps250bn (US$132m) rediscount line to support the purchase of locally-assembled small cars (and pick-ups). However, this had little success in boosting sales, which remained more dependent on other factors affecting real income, such as high unemployment and poor consumer confidence.
Oil price and petrol consumption
Petrol consumption ('000 tonnes) Oil prices (Brent; US$/b)
Source: Economist Intelligence Unit.

2006 a 3,690 54.4

2007 a 3,829 65.4

2008 a 3,887 72.7

2009 a 3,906 97.7

2010 a 3,991 61.9

2011 b 4,081 77.0

2012 b 4,180 73.0

2013 b 4,289 80.0

2014 b 4,407 84.5

2015 b 4,528 83.5

a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts.

Supply. A government programme grants fiscal incentives for vehicles to switch to natural gas as their main fuel. The conversion kit and the equipment to set up natural gas stations are exempted from VAT. The governments goal was to increase the total number of natural gas-fuelled vehicles by 160,000 in 2006-10, and this target was surpassed by the end of 2008. As of March 2010 conversions were approaching 175,000 (which took the stock of vehicles using natural gas to more than 308,000). The growth rate is impressive, but the number of vehicles using natural gas will remain small in relation to the number of vehicles using petrol; it is also dwarfed by the number of natural gas
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users in Argentina or Brazil. The number of natural gas pumping stations has grown significantly, but, at around 600 in mid 2010, it is still well below the 2,000 existing petrol stations, and they are mostly concentrated in the main cities, especially Bogot (with 145). Despite growth in the number of users and stations, natural gas will remain much less widely used than petrol or diesel. The Unidad de Planeacin Minero Energtica (Upme, the government's mining and energy planning unit) predicts that the vehicular natural gas sector in Colombia will grow by 7% per year until 2020. The government will continue to promote the use of biofuels in order to protect the environment and achieve the substitution of oil-related propellants in the long term. Legislation approved in 2005 decrees that there shall be mix of a minimum of 10% of alcohol in petrol and of 5% in diesel sold to consumers before the end of 2010. In March the alcohol content in petrol reached 8%, but it is expected that the 10% goal will be reach by year-end.
Item Regular unleaded petrol, 1 litre (av) Price (US$) 1.17 % of monthly personal disposable income 0.66 Affordability rank 51 out of 57

Note. Affordability rank: for each country the price of an item as a percentage of monthly personal disposable income is calculated. Countries are ranked according to these percentages. The most affordable country will have the lowest percentage and be ranked first.

Commercial and other vehicles

Commercial vehicle sales grew quickly in 2006-07, in line with booming economic growth (there is a close correlation between GDP and demand for this segment of automotives). The truck and cargo vehicle segment is dominated by imports, whereas the majority of passenger buses are assembled locally. Government regulation seeks to balance the renewal of the country's ageing truck stock with the existing oversupply of cargo capacity. Demand for buses will be supported by the construction of massive new urban transportation systems in the main cities. Commercial vehicle sales will be affected by slow economic growth in the medium term, but will be backed by improvements in public security and boosted by a relatively strong exchange rate. The stock of motorcycles will continue to increase, but at a slower pace than in 2005-08. GM-Colmotores is the major producer of light trucks in the country, assembling 4,500 units in 2009. Hino Motors (majority owned by Toyota) began operations in Bogot in 2008 and has the installed capacity to produce around 8,000 units (buses and trucks) per year. Hino assembled 2,130 trucks in 2009.
2006 a 28.3 18.6 46.9 41.9 2007 a 28.7 21.9 50.5 7.7 2008 b 26.8 14.3 41.1 -18.7 2009 b 22.4 8.3 30.8 -25.1 2010 b 23.4 8.8 32.2 4.6 2011 c 24.8 9.5 34.3 6.7 2012 c 27.3 10.5 37.8 10.1 2013 c 30.5 11.6 42.1 11.4 2014 c 34.4 12.7 47.1 11.9 2015 c 38.7 13.9 52.7 11.8

Commercial vehicle registrations

Light commercial vehicle registrations ('000) Medium & heavy vehicle registrations ('000) Commercial vehicle registrations ('000) Commercial vehicle registration growth (%)
Source: Economist Intelligence Unit.

a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts.

Components

Demand. The market for auto parts in Colombia is currently estimated at around US$3bn, according to Asopartes, the association of auto parts companies. DANE estimates that the bulk (over 60%) of production consists of
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tyres, followed by glass and electric parts (such as batteries). The locally-based auto parts industry houses local and multinational companies and grew by 25% per year in 2003-07, in line with the boom in local vehicle sales, as well as to serve regional export markets, taking advantage of preferential trade agreements with neighbouring countries. However, in 2008-09 auto parts sales were hit by weaker automotive sales owing to the domestic economic downturn, as well as by restrictions on exports. Domestic auto parts sales fell by 7.4% (in real terms) in 2009 but have rebounded in 2010, along with auto sales, and were up by 16.4% year on year in August 2010. The main export markets are Venezuela, Ecuador, the US and Brazil, with Venezuela and Ecuador accounting for about one-half of the total. Earnings from auto parts exports reached a record high of US$519m in 2008, but declined to US$439m in 2009, largely owing to the trade restrictions imposed by Ecuador and Venezuela, and the weak economic performance of these two countries. GM-Colomotores, Sofasa-Renault and CCA-Mazda normally purchase more than US$600m in auto parts from locally-based producers. The local industry supplies about 45% of vehicle companies' auto parts needs. Exports of auto parts averaged US$200m a year during the first half of the 2000s, and later surged to over US$400m a year in 2006-08. The downturn in vehicle sales for the local and export markets in 2008-09 hit demand for auto parts as plants curtailed production. There will be demand for auto parts for repairs and replacements in 2010-15, given the increase in Colombias fleet of vehicles during the 2003-07 sales boom, and also because the still-poor quality of Colombias roads increases vehicle wear and tear and hence the need for repairs. Maintaining buses used in recently implemented mass public transport systems (for example, Transmilenio in Bogot and MIO in Cali), and the roll-out of these programmes to other cities, such as Medelln, will also support demand for auto parts. As vehicle sales for the local and export markets recover, further demand for auto parts will also pick up. Preferential trade deals with neighbouring countries give privileged access for Colombian-based auto parts producers to an enlarged fleet of motor vehicles, including Mexico (25m vehicles); Venezuela (3.5m); Chile (2.6m); Peru (1.4m); and Ecuador (1.1m)all figures are for 2007. Supply. Proexport estimates that total sales (domestic and external) of the auto parts industry averaged US$1.5bn in 2006-08. The Superintendencia de Sociedades (superintendency of corporations) estimates that the sectors operational income fell to US$1.4bn in 2009, compared with a record of US$1.8bn in 2007. Colombia houses both local and multinational companies to serve the domestic and regional export markets. The majority (around 53%) of Colombias auto part production is located in Bogot. Michelin (France), Goodyear (US), Saint Gobain (France) and Yazaki Ciemel (Japan) are some of the multinational auto part producers based in Colombia. However, there are a large number of small- and medium-sized shops that provide the bulk of smaller, more standardised parts. The government is aiming to expand auto parts exports. To this end, it is increasing support in terms of training and capital, which will materialise in improved production standards in the long run. New FTAs will inevitably lead to consolidation and efficiency improvements in the industry. Ratification of the FTA with the US will lower tariffs on

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auto parts, providing increased opportunities for US suppliers. Local producers fear the potential signing of an FTA with South Korea (for which preliminary conversations have already begun), as South Korea is an aggressive auto parts competitor worldwide. In 2009 auto parts imports totalled US$662m, down from a historic peak of US$776.7m in 2008, as the automotive market slowed down in tandem with sluggish domestic GDP growth. The main foreign suppliers include the US, Japan, China, Brazil and South Korea.

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