BUENOS AIRES (Bloomberg) -- Fiat's Argentine unit will counter its declining market share in Brazil, its biggest market, by ramping up production as much as 43 percent next year, President Cristiano Rattazzi said.
“We need a lot more cars, we are losing market share in Brazil for a lack of cars,” Rattazzi, said in an interview in Buenos Aires. “Brazil is the big market.”
Fiat Argentina is investing 813 million pesos ($205 million) to build a new model it will sell in both Argentina and Brazil beginning as early as March. Overall production at Fiat's plant in the province of Cordoba may reach 100,000 units in 2011, up from about 70,000 this year, Rattazzi said. About 85 percent of that output is for export to neighboring Brazil, where the company was the second biggest seller, after Volkswagen´s local unit, in October.
Brazil accounted for 17.6 percent of Fiat's 50 billion euros ($67.5 billion) in revenue in 2009, more than any country in Europe except Italy, according to the company's financial results. Fiat owns 20 percent of Chrysler Group LLC.
The auto industry has been the “engine” of Argentina's economic growth since 2004, said Maximiliano Scarlan, an economist at Abeceb.com. The country's economy may expand 9 percent this year, led by vehicle production according to the central bank. The economy grew 0.9 percent last year.
Following a slowdown in 2009, Argentine automakers have increased output by 44 percent so far this year to 580,000 units. They also boosted exports, mostly to Brazil, by 44 percent in the same period.
Brazil's economy, the biggest in Latin America, will expand 7.6 percent this year and 4.5 percent in 2011, according to the median forecast in a central bank survey of about 100 economists published today. Fiat accounted for 22 percent of the 228,175 vehicles sold in Brazil last month, down from 25 percent a year earlier, according to the National Vehicle Manufacturer's Association in Sao Paulo.
Automakers represented about 57 percent of the growth of Argentina's industrial output this year, compared with 35 percent in 2006, Scarlan said. The country will likely produce about 710,000 units this year, surpassing a record 590,000 in 2008, he said.
“There are expectations of reaching 800,000 units because Brazil has a strong outlook of growth in the coming years, has a domestic market with a new group of consumers and good financing,” Scarlan said.
Rattazzi said Argentina's government will need to take measures to slow annual inflation he estimated at 25 percent to 30 percent, the fastest in the region after Venezuela.
The national statistics institute reported on Nov. 12 that consumer prices rose 11.1 percent in October from a year earlier, less than half the estimates by Rattazzi and other private economists, including former central bank President and current opposition lawmaker Alfonso Prat-Gay.
“When you have 30 percent inflation, you have a problem,” Rattazzi said. “Coming out of inflation has never been easy but it has to be done.”