MEXICO CITY - Last year Mexico finally regained the ground it lost in 1995, when a peso devaluation crushed the market. But the industry now is cautiously watching a new concern: The full return of a new-vehicle tax.
Mexico's ISAN tax is imposed on the purchase price of a new vehicle, in addition to separate vehicle sales taxes. The tax ranges from 2.5 to 17 percent, depending on the price of the vehicle.
In an effort to rekindle the industry after it collapsed in 1995, the government waived the ISAN tax. Last year, the government reimposed 75 percent of it. And as of January of this year, 100 percent of the tax was back on the books.
How much that will matter to consumers is not yet clear. The Mexican Dealers Association says it expects a dip in new-vehicle sales for 1999 as a result, although it does not yet know to what degree.
Association President Juan Arriaga thinks the burst in December 1998 sales was partly because of the tax's return. Consumers scrambled to buy cars to avoid making purchases in January with the full tax.
'The first months of 1999 will be difficult because we will have the full cost of the ISAN,' Arriaga said.
However, General Motors de Mexico is less cautious. 'We forecast a 5 percent increase this year over 1998,' said Troy Clarke, the company's general director.
One key consideration for 1999 will be credit availability. Low-interest loans, which have become popular in the market, could offset the higher costs associated with more taxes.
In other news from Mexico:
The Mexican auto market will be the only one on the continent to grow significantly in coming years, said Ron Zarrella, president of General Motors North America. That's one reason why Mexico is so central to GM's North American strategy, he said.
Another reason is production, as Mexican-built GM light trucks will continue to feed the U.S. market. 'If we have to talk about costs and only costs, Mexico will be the less expensive market to build vehicles,' Zarrella said.
As part of its efforts, GM soon will open a technical center in Toluca, which will employ 2,000 engineers. Said Zarrella: 'We have noticed that Mexico has a great talent for engineers.'
The new Chevrolet Impala, imported from the United States, will go on sale this spring, said Troy Clarke, president of GM de Mexico. It will be an important car for GM in Mexico. The Impala and the Grand Prix are aimed at the niche left by the Buick Century, which is no longer sold in Mexico.
DaimlerChrysler AG expects strong demand for the new PT Cruiser, which will be built next year in Toluca. Production of the Neon, Stratus and Cirrus in Toluca will be phased out, and those cars will be imported to Mexico from the United States.
'Maybe we will have to expand the plant there because our forecast of demand for the car is very high,' said DaimlerChrysler Chairman Robert Eaton. He did not provide specifics.