Powertrain diversification, connected cars, and new mobility models will further impact market dynamics

By Ingrid Schumann, Industry Analyst – Mobility

In March this year, leading automaker Stellantis announced the “largest investment in the history of the Brazilian and South American automotive industry.” The five-year strategic plan which focuses on decarbonizing mobility in the region envisages a €5.6 billion investment from 2025 to 2030 and the launch of close to 40 new offerings. Such plans are indicative of the growth potential of Latin America’s automotive industry which is set to register a 4.8% YoY growth in 2024.

Against this backdrop, Frost & Sullivan’s 2024 outlook for the Latin American automotive market identifies five key trends that will shape market dynamics over the course of the year. These include powertrain diversification, domestic production of electric vehicles and hybrids, connected cars, new mobility models, and the increased presence of Chinese automakers. How will these trends play out and what will their implications be on market development and for automakers like Stellantis?

Looking back at 2023
In 2023, the Latin American automotive industry – covering key markets including Brazil, Mexico, Colombia, Ecuador, Chile, Uruguay, Peru and Argentina – registered 8.2% YoY growth in unit sales, marking the third straight year of growth. While this underlined the continued recovery of the region’s light vehicle market following the pandemic, sales at around 4.8 million units still hovered below pre-pandemic levels of 2019. Amidst generally positive trends, automotive sales in the region’s largest market, Brazil, recorded steady growth, although they plunged in other markets like Chile and Colombia.

Bucking fears of the impact of chip shortages on production output, cars and SUV sales registered solid, if unspectacular, low single digit growth. In contrast, the pickup segment recorded the highest growth in 2023, even as improving model availability and affordability provided a fillip to the uptake of electrified vehicles (xEVs), including hybrid electric vehicles (HEVs), plug-in hybrid electric vehicles (PHEVs), and battery electric vehicles (BEVs). Backed by cost competitive offerings, Chinese OEMs deepened their penetration in the region, expanding even in large markets with well-established traditional automakers, like in Brazil and Mexico.

To learn more, please see: Latin America Automotive Industry Outlook 2024 or contact sathyanarayanak@frost.com for information on a private briefing.

Five Key Trends of 2024

Our research has highlighted five major trends that will shape market prospects in 2024. Powertrain diversification will become prominent in line with the global push towards clean mobility. Sales of xEVs will increase.

Such trends will be reinforced by expanding domestic production of xEVs. The setting up of xEV manufacturing facilities across the region will boost local vehicle production, intensify competition, lower prices, and make xEVs more affordable, while spurring sales.  Growth impetus will also come from technology in the form of novel flex fuel hybrids and from charging infrastructure development via more public-private partnerships.

Chinese OEMs will continue strengthening their presence across Latin America. From building local factories to launching new models across multiple segments, from extensive product portfolios to cost competitive offerings, particularly for xEVs, Chinese automakers will come to the forefront. Chery, MG, JAC Motors and BYD are the top four Chinese OEMs that are already competing aggressively in the region.

Connected cars are enabling a range of in-vehicle services and applications. While still nascent, automakers are moving to leverage the revenue potential represented by embedded connectivity to continuously launch innovative in-vehicle services.

New mobility business models are gaining appeal with consumers for the flexibility and convenience that they offer.  For instance, vehicle subscription services have become popular in Brazil, with over 30 companies vying for a share of revenues.  It is anticipated that such models will multiply across the region as awareness increases, competition intensifies, and prices drop.

What Lies Ahead in 2024

Frost & Sullivan’s growth opportunity analysis projects total vehicle sales in Latin America to cross five million units in 2024, driven by greater affordability, innovative business models, and enhanced domestic vehicle production.

Led by Colombia, light vehicle sales will grow in most major markets in the region. Brazil, Chile, Mexico, Peru, and Uruguay will all register increasing sales, although they are anticipated to dip in Argentina and Ecuador, both of which are facing economic turmoil.

The xEV segment will show robust growth of around 34.2% in 2024, powered by Chile and Brazil. Charging infrastructure will be unable to keep pace, even as governments proactively support the shift to clean mobility.

Promisingly, cars, SUVs, and pickups will all register growth. Cars, in particular, are forecast to breach the 2.1 million unit sales mark. The light commercial vehicle segment will be the only disappointment in an otherwise well performing overall market with sales anticipated to shrink in 2024.

The Chinese juggernaut will continue to march on. Advanced technology, new models, and EV offerings across multiple segments will underpin their robust performance. Moreover, they will continue to reinforce their presence by strengthening local production capacity and making their offerings more affordable to a wider audience.

What Next?

Many countries in Latin America are currently struggling with economic uncertainty. High vehicle purchase costs and interest rates could hamper automotive sales. Therefore, automotive manufacturers, rental and leasing companies need to embrace new business models like vehicle subscription. Already established in Brazil and Mexico, this new business model will provide greater flexibility to customers, boosting adoption.

In 2024, an estimated 1.7 million connected cars are likely to be sold in the region. In addition to customer demand for safety and security features, automakers can include a range of in-vehicle connected services to generate continuous and highly lucrative revenue streams.

EV uptake is on an upward trajectory. Growth acceleration will require ecosystem partnership between automakers, governments, energy companies, and infrastructure providers.

With inputs from Amrita Shetty, Senior Manager, Communications & Content – Mobility


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