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Mexico fuel price increase seen boosting sales of more efficient cars

Vehicle sales in Mexico rose by 18.5 percent to more than 1.4 million in the year through November, official data shows.

By: Reuters | Mexico | Published: December 30, 2016 5:09:51 am

An imminent jump in Mexican gasoline prices should not reduce auto sales in the near term but will ultimately boost the market for more fuel-efficient cars, a leading Mexican auto industry group said on Thursday. This week, Mexico’s finance ministry said gasoline costs would rise by up to 20.1 percent in January as it moved to end years of government-set prices, prompting economists to begin upwardly revising inflation forecasts for 2017.

Higher driving costs could weigh on hitherto brisk appetite for new autos in Latin America’s second-biggest economy. Vehicle sales in Mexico rose by 18.5 percent to more than 1.4 million in the year through November, official data shows. Guillermo Rosales, deputy director of the Mexican association of automobile distributors (AMDA), said higher fuel costs would likely boost demand for more energy-efficient cars.

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“In the short-term, I don’t think there will be a decline in the number of vehicles sold,” Rosales said in a statement to Reuters. “In the medium to long term, we’ll see a change in the trend that favors models which consume less (fuel).” Mexican motorists were downbeat about the immediate outlook, saying they would have to work longer hours and spend less to compensate for higher fuel costs. “It’s going to have a huge impact,” said Juan Olivar, 35, a Mexico City taxi driver, noting that taxi fares would need to rise to make up for the fuel hike.

Complicating matters further, parts of Mexico have also been hit by fuel shortages, partly due to theft via illegal taps in the pipeline network of state oil company Pemex. On Christmas Day, the company cautioned Mexicans against making “panic buys” of fuel in the central state of San Luis Potosi as gas stations reported shortages. Gerardo Chavez, 54, a fuel attendant in the affluent Lomas de Chapultepec neighborhood of Mexico City who depends on tips, said he had earned no tip money to buy food for his family one day last week when his station ran short of gasoline. “With the fuel increase, people aren’t even going to tip us,” he said.

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