SANTIAGO, CHINA - After a three-year bonanza, Chile's auto industry expects sales to fall in 2009 under the weight of tighter credit conditions, high interest rates and a stronger dollar amid global financial crisis.
Ivan Silva, executive vice president of the National Automotive Association of Chile, told Reuters that automakers will likely still move to raise prices to compensate for a sharp depreciation of the Chilean peso against the dollar.
"There will be a decrease in sales in 2009. We don't know how big it will be, but we hope it will not be a strong contraction," Silva said in an interview.
"When there is a contraction in the wider economy, our sector suffers quickly, and the opposite is also true when the economy improves," he added.
In 2007, a total of 227,000 vehicles were sold in Chile.
The National Automotive Association of Chile, also known as the ANAC, estimates a record 250,000 vehicles will be sold this year - worth around $2.25 billion (S$5.4 mil) - despite the fact that sales have braked hard in the last months of the year, given the peso's sharp depreciation that made imports more expensive.
"The dollar has risen (against the peso) between 20% to 30% recently, so the price of cars will have to adjust by the same amount," Silva said.
"No one yet dares to revise prices upwards by that percentage, but some brands have raised them by 4% or 5% and will surely continue to make increases every 15 to 20 days until they reach their real price."
As Chile weathers the impact of the international financial crisis, which has triggered a near collapse of auto sales in the United States, financial institutions are increasingly cautious when it comes to approving loans for auto purchases.
"We are seeing fewer people coming to our sales salons, so there are advertising campaigns saying: 'Buy now because car prices will soon rise sharply.'
"The campaigns are working, but I don't think it will last more than two or three months."
Chile, where there is one car for around every six people, does not produce or assemble vehicles.
But car sales have been buoyant as a result of free trade pacts and the fact that the economy has grown at a strong clip in recent years.
There are 2.5 million cars on the road in Chile, with around 1.5 million of those in the capital Santiago.
(Reporting by Monica Vargas; Editing by Simon Gardner and Jan Paschal)
