The Argentine automotive industry is going through one of its most critical moments in recent history due to the country’s accentuated economic crisis, which is affecting the development of GM’s operations and local business.
The GM Argentina business, like those of other automobile manufacturers, is being increasingly affected by the economic crisis of the South American country, with high inflation rates and a marked shortage of foreign currency. The situation continues to be complicated by the continued import restrictions and high taxes applied by the authorities, making it severely difficult to maintain both local production levels and total vehicle inventory.
In particular, the growing shortage of foreign exchange amid Argentina’s exchange controls directly affects all of GM’s operations in the country. Although the Argentine government created incentives with the idea of promoting national production and export of vehicles so that companies generate their own foreign currency, the production level of the GM Alvear plant is limited by the low supply of imported parts and the difficulties of local suppliers.
At the same time, the limited access to foreign exchange has also generated greater restrictions on the importation of vehicles. In fact, authorities have already accumulated two consecutive months without approving import permits from the Import System of the Argentine Republic (SIRA, for its acronym in Spanish) to the automotive sector. This has drastically reduced the inventory of GM models made in Brazil such as the Chevy Onix – which for years was Chevrolet’s best-selling car in Argentina.
This complex situation is combined with multiple layers of taxes applied both in internal sales and in the entire manufacturing process, affecting the competitiveness of vehicles manufactured in Argentina and directly harming their export potential. In practice, these taxes make it more costlier to manufacture the Chevy Cruze and Tracker at the GM Alvear complex and costlier to export units to other countries in the region.
The prolonged Argentina’s economic crisis complicates the performance of GM’s local business, as well as the operations of GM South America based in Brazil, which has had to make several production and future project adjustments due to serious difficulties in marketing its vehicles in the Argentinian market. With the near end of Cruze production, the Alvear plant will be left with auxiliary manufacturing of the Tracker and no plans to add a new product to its lines in the medium term.