Between motor vehicle manufacturing and auto -parts and accessories production, the sector contributed some 2.4 trillion Colombian pesos (approximately 0.60 billion U.S. dollars based on a September 28, 2023 exchange rate) to the country's gross domestic product (GDP) in 2022. It employed around 13,150 workers a year earlier, most of them in the auto parts and accessories production segment. Despite increased car demand, employment in the sector has been dropping in 2020 and 2021, particularly in bodywork and trailer production. This drop in the sector’s workforce is partly due to the global supply issues the automotive industry faces.
Dependence on foreign investments
Automobile production in Colombia is slowly recovery from the economic impact the COVID-19 pandemic had on the industry: In 2022, their annual motor vehicle production grew to nearly 51,500 units, a rise of some 26.25 percent compared to 2021 production volumes while still around 34 percent below Colombia’s 2019 output. International manufacturers heavily contribute to this sector and its economic recovery. Colombia established itself as a regional manufacturing market for major companies such as General Motors and Renault. These two companies have dominated the Colombian market in vehicle sales and production. To boost foreign investment in the industry even further, the government has focused on developing industrial parks and free trade zones. However, and perhaps as a result, the South American nation still relies heavily on external sources to meet its demand, with the value of automotive imports far exceeding that of exports. While the Colombian automotive market is ripe for foreign investments, it has also been deeply impacted by the volatility of exchange rates. The economic instability created by the pandemic led to a devaluation of the Colombian peso in 2020, and the industry also has had to contend with the global automotive semiconductor shortage, which has depleted the vehicle stocks of exporting countries. In parallel, the demand for vehicles is increasing, and nearly three-quarters of consumers reported being likely or very likely to change brand for their next car purchase despite high brand satisfaction. This increases the challenges faced by the country to diversify its vehicle offer and keep its automotive sector attractive for foreign investments.Used cars and electric vehicles are on the rise
The passenger car revenue forecast projects that this market will be worth some 7.09 billion U.S. dollars in 2027, up from some 6.28 in 2022. This slow growth is dependent on a wide range of factors, including the popularity of used cars with Colombian consumers. In 2022, over 1.12 used vehicles were sold in Colombia, a ratio of over four used vehicles per new vehicle sale. The 2022 used vehicle sales were higher than those recorded in 2019, boosted by the increased car demand in the country, but this is only one aspect of the sector’s growth.Market recovery is also tied to the country’s fleet electrification. Electric and hybrid vehicles did not record the same drop in sales as fossil fuel vehicles during the COVID-19 pandemic and have soared since 2021. In 2022, nearly 27,900 of these vehicles were registered in Colombia. This represented an increase of around 57.3 percent compared to the figure reported in the previous year and amounted to over 10.6 percent of new vehicle sales in the country. The Japanese multinational car company Toyota is at the forefront of this trend, selling some 9,400 electric and hybrid vehicles in Colombia in 2022. This advance in electric vehicle sales has mainly resulted from the elimination of import tariffs established by the government in December 2019—part of a series of measures to reach the Paris Agreement emission goals. With the decree in effect until 2027, this trend will likely gain ground in the coming years. Propelled by governmental incentives, the electric vehicle market in South America is projected to grow to around 11.7 billion U.S. dollars in 2028, in line with a global shift to sustainable mobility.
