Chile is often cited as being the envy of other nations in this hemisphere. They enjoy a vibrant democracy, they have strong social programs, and an economy that has managed strong and steady growth consistently since the mid 1980’s. It also goes without saying that this nation of 18 million people is among the most picturesque and ecologically diverse nations in the world. The good news for the automotive industry is that Chile enjoys a vibrant car culture that has been gaining momentum over the past 30 years.
The liberalization and reorientation of the economy during the late 1970’s and early 1980’s was dubbed the “Miracle of Chile” by renowned economist Milton Friedman. A combination of a resurgent democracy and the freeing of markets, allowed for greater economic investment. This resulted in sustained economic growth, with Chile having maintained a 4.2 percent per capita GDP annual growth rate since the 1980’s. Chile has also embraced free trade, signing free trade agreements (FTA’s) with over 65 countries. In fact, the U.S. entered a FTA with Chile in 2004, slowly reducing tariffs until 2015, at which point all trade between the two countries became 100 percent tariff free. Bilateral trade is valued at more than $30 Billion, with the U.S. enjoying a nearly $9.1 Billion trade surplus.
The economic improvements of recent decades have been very broad based throughout the population, allowing many working families to enter the middle class. As it has happened around the world, as family disposable incomes rise, private car ownership rises as well. Chile has seen an explosion of its motor vehicles per capita since the early 2000’s. In fact, between 2001 and 2016, passenger car density increased over 300 percent, from 85 vehicles per 1,000 people to over 260 per 1,000 people. Since there has been no vehicle manufacturing in Chile since 2008, all new vehicle sales are of imported vehicles. The last manufacturing facility, a GM plant that made LUV utility vehicles, closed in 2008.
Car sales in Chile had a very strong year in 2017. The market rose 18.2 percent over 2016, marking its best year of growth since 2002. Nearly 362,000 new cars and trucks were sold. Market share amongst the major auto makers in Chile is well distributed, with the Hyundai/Kia brands combining for a 17.5 percent market share (9.2 percent & 8.3 percent, respectively.) Chevrolet came in second with 9.0 percent market share, mostly on the strength of the Chevrolet Sail, which GM builds in China. Nissan (8.0 percent) and Suzuki (7.5 percent) rounded out the top 5 best-selling brands in 2017. Mitsubishi Motors (ranked 10thin total sales) had the best-selling vehicle in Chile, on the strength of the Thailand made L200 compact pickup, selling over 9,800 units. The Hyundai Accent was the best-selling passenger car, with sales just over 9,500 units. With a total of 5 million cars and trucks on the road, and an average vehicle age approaching 9 years old, there are ample aftermarket opportunities in Chile.
The Chilean aftermarket size was estimated to be $825 Million in 2017, according to the Federation of Chilean Industry (SOFOFA). It is important to note that Chile has almost no auto parts manufacturing industry of its own. In fact, local production is estimated to be only 10 percent of the total aftermarket. “There is no appreciable local production of auto parts,” said Claudia Melkonian, a Commercial Assistant with the U.S. Commercial Service in Santiago, Chile. “All parts and accessories are imported. Chile may produce tires (only for export), screws, filters and other parts manufactured in metalworking industries,” she said, but that is a small percentage of the market.
The signing of the FTA has had a very positive impact on U.S. parts sales in Chile. United States customs data indicated total automotive parts exports to be $341 million during 2017, up slightly from 2016. Customs data indicates the most popular part categories from the U.S. included suspension systems, diesel engine parts, air filters and fuel pumps.
The national automobile association, known as ANAC (Asociación Nacional Automotriz de Chile A.G.) notes that the number of vehicles in Chile has doubled in the past decade. In recognition of the market potential in Chile, many U.S.-based aftermarket manufacturers are expanding sales in the country. Aftermarket exports to Chile have always been lucrative, but since the elimination of all tariffs, the interest in this market has intensified. This interest has also caught the attention of U.S. automotive trade associations.
The Auto Care Association will host a trade mission to Chile, August 21-22, 2018 as part of the Market Development Cooperator Program (MDCP) award the association received from the U.S. Department of Commerce to support export promotion projects in Latin America.
“The Auto Care Association trade mission provides companies a business development opportunity to explore or expand in the Chilean market, gain first-hand market information and meet with potential clients and partners, who are pre-screened to match participants’ specific business objectives,” said Carolina Arregoces, who is an International Affairs Associate with the Auto Care Association. Typically, trade missions of this type are designed to be turnkey events for participants. Most of the activities are pre-arranged by staff, and participants only need to bring their sales materials. “For small companies who do not have the resources to organize a fact-finding mission, the trade mission is an opportunity to explore the market as part of a delegation with meetings arranged on behalf of them by the U.S. Embassy,” she said.
One obstacle that is always faced by exporters is a lack of good catalog data when trying to sell abroad. Aftermarket suppliers in the U.S. rely on electronic data that uses common standards. This allows consistent mapping of manufacturer data to established make/model tables. Such standards don’t often exist abroad, and if they do, they use standards that are different from those in the U.S. During the summer of 2017, the Auto Care Association hosted a technology standards conference in Santiago. It was the second technology standards conference to be held in a key Latin American country.
“The conference, attended by more than 60 local auto care stakeholders, including industry executives and government officials, focused on the processes around standards development and maintenance for ACES (Aftermarket Catalog Exchange Standard) and PIES (Product Information Exchange Standard),” said Arregoces. This would be helpful to manufacturers seeking to offer accurate electronic cataloging in Chile. The result would be better catalog data, less chance of selling the wrong part and fewer lost sales. The conference was co-organized by the U.S. Commercial Service Office with the U.S. Embassy in Santiago, and CAREP (Cámara Chilena de Comercio de Repuestos y Accesorios Automotrices), the Chilean Automotive Chamber of Commerce, representing auto parts importers and distributors.
The obvious challenge to American companies seeking to sell into Chile would be the lack of commonality in their parts portfolio. With minor variations, North America has a rather common automobile car parc. In Chile, finding vehicles that are common in North America would be a distinct challenge. Therefore, companies seeking to sell in Chile will have to make parts that are needed there. It might also be useful to know that Chile complies with the Euro V emission standards for cars and light-duty trucks, though some vehicles being imported are already in compliance with the Euro VI standard, which has not officially been adopted in Chile.
Chile could represent significant opportunities for U.S. parts makers looking to expand overseas. The combination of an economy that’s growing stronger, a vehicle population that has recently doubled, and a free trade agreement with the United States makes Chile an almost ideal market for expansion. With initiatives underway that will ease access to electronic cataloging, companies who are willing to invest in having a portfolio that fits the market will likely find it very rewarding.
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