With conditions ideal, sales are expected to keep speeding along

By RICARDO SANDOVAL / The Dallas Morning News

MEXICO CITY – New-car buyers in Mexico have never had it so good.

Prices are coming down as new makes and models find their way to Mexican showrooms, and auto dealers are offering a growing array of credit deals at stable interest rates.

Ford Motor Co. said this week its Mexico credit arm is building a $200 million kitty to underwrite new consumer car loans. That comes in the wake of Nissan Motors' recent decision to establish a Mexico branch of its Dallas-based Nissan Motors Acceptance Corp., offering an array of new consumer credit deals.

Even Mexico's banks, leery of consumer loans since the peso crash of 1994, are gradually returning to the car-loan business, prompted by a relatively stable Mexican economy and interest rates generally under 8 percent.

To analysts and consumers, the moves are evidence that the Mexican car market is in its best condition ever.

Last year, around 1 million new cars were sold throughout Mexico – only slightly higher than in 2002. But those sales occurred amid a slumping Mexican economy.

This year Mexico should fare better, and automakers are optimistic their sales will jump along with the economy.

"The car industry here is very healthy," said Javier Mancera, a consultant with the Mexico office of Austin-based Public Strategies Inc. "That's one thing that's working well in the Mexican economy these days."

The car-sales boom is seen on the bottom line at Nissan's Mexico operation. The Japanese carmaker's X-Trail sport utility vehicle was the best-selling light truck in Mexico last year, at 14,387 units – double the company's own prediction.

In January of this year, Nissan said it sold 1,689 X-Trails in Mexico. And the company's Tsuru compact alone captured 6.4 percent of new-car sales in Mexico, with 64,000 units.

Ford also scored significant sales in Mexico in 2003, financing the purchase of 94,000 new and used cars.

This year, armed with the credit fund, the world's No. 3 carmaker said it would finance about 110,000 new cars.

Ford credit officials said financed cars in 2004 will repre- sent about 65 percent of total Mexico sales. The company plans to offer 48-month packages that start with $950 down and unconventional packages that cater to the Mexican consumer in particular.

Safer bet

Automakers and banks say they're increasingly willing to bet on Mexican consumers because they're seeing better payment performance on the part of borrowers. Ford officials said the company's rate of non-performing loans has improved of late.

"Over time, we've observed that the Mexican consumer has improved his credit administration," said Oscar Adad, director general of Ford Credit Mexico. "This, along with more orderly lending policies, has led to a reduction of the non-performance risk that was typical in past times of crisis."

Zero-interest deals are common at most dealerships.

But there are also unconventional finance packages. For example, consumers who are unable to plunk down a hefty down payment can instead make monthly payments for up to 18 months before they get the keys to their new cars.

"For me, that option from Ford was the best," said Claudia Phillips, 32, a health insurance vendor who was checking out new cars on a lot on Mexico City's south side.

"My father did it this way. And I did not have the 30 percent for a down payment and anyone who could serve as a co-signer. I think there are many more people like me in Mexico."

Besides underscoring a growing confidence in the Mexican economy, the rising population of new cars tells analysts that the country's notorious ranks of aged, polluting clunkers is disappearing.

That means cleaner air for Mexico City.

The bad news?

Urban planners fear that the fast-growing car population is starting to overwhelm an obsolete network of rutted streets in Mexico City – home to the country's highest concentration of the new vehicles.

Congestion concerns

Last year, 250,000 new cars joined the Mexico City fleet, according to city registration figures compiled by Bernardo Navarro, an urban planning specialist at the Autonomous University of Mexico, Xochimilco campus.

World-class gridlock could obscure gains the country is realizing from brisk auto sales, Mr. Navarro said.

One victim of the car crush may be Mexico City's Day Without a Car program.

The program requires drivers to park, one day each week, older cars that are the greatest polluters.

With newer cars on the road, experts are increasingly concerned that the program is applying to fewer and fewer vehicles.

More new cars in Mexico City are sporting "00" stickers, exempting them from smog checks and allowing them to operate daily.

"Mexico City congestion will reach gridlock soon without major public work on the existing road infrastructure," Mr. Navarro said. "There are 3.3 million cars registered in Mexico City, and that's probably a low number. There are physical limits to what the infrastructure will tolerate."

Some projects are under way that may help that gridlock.

These include double-decking crucial arteries, installing modern traffic lights, and a federal highway that would allow cross-country traffic to bypass the nation's capital.

Pessimism remains

Still, Mr. Navarro remains pessimistic because he believes both the city and the car industry have ignored the rickety fleet of public buses and rusting, privately owned microbuses and taxis that move millions of people around the chaotic metropolis daily.

"Credit incentives, like those now available for average consumers, are badly needed for the public transport sector, where the vehicles are dangerously old," Mr. Navarro said. "It would be nice if someone would target loans in that direction."

So far, the doomsday traffic prediction has not scared off prospective car buyers who seem thrilled at the chance to get into a new vehicle with easier prerequisites.