With little growth in the traditional markets of North America, Western Europe and Japan, the worlds auto industry is increasingly looking to developing countries, Manes noted, including Latin America, where economies are growing rapidly.

This year, 2007, is the fourth consecutive year of economic growth in the region, Manes said, with GDP growth averaging 5 percent. Much of the rising demand for new cars is coming from Latin Americas new middle classes.

Latin Americas total vehicle population is now 61 million, or about 7.8 inhabitants per vehicle. Brazil is the leader, with a population of 24 million vehicles. Mexico is second with 21 million, followed by Argentina with 7 million. But the average vehicle age in those countries is sobering: 9.9 years in Brazil, 12 years in Mexico, 13.5 years in Argentina. So when theres new [emissions] legislation, Manes said, we have to wait 10 years for demand to grow for new lubricants.

Regional trade blocks – NAFTA for Mexico and MERCOSUR (or MERCOSUL in Portuguese) for South Americas major economies, have shaped the Latin American automotive industrys footprint, Manes said. Brazil, Mexico and Argentina produce more than 95 percent of the 4.8 million vehicles manufactured in the region. In 2006, 3.7 million units were sold in the region (including imports), while 2.6 million were exported that year.

Brazils Auto Industry
Brazil is the regions single largest vehicle market, accounting for 45 percent of total regional vehicle sales of 3.7 million in 2006, followed by Mexico with 32 percent, and Argentina with 9 percent, Manes said.

Twenty five automotive companies assemble vehicles in Brazil, producing 2.5 million vehicles in 2006. They are supported by 500 auto parts companies. Brazil ranks eighth worldwide in vehicle production, ninth in internal sales, and tenth in exports, said Manes. 2006 was Brazils best year. Internal [vehicle] sales went up 4.4 percent, and exports were up 3.1 percent.

Special factors in Brazil include dominance of the one-liter engine, and the countrys leadership in ethanol fuels. Flex-fuel cars, which can use fuels containing 25 percent to 100 percent ethanol, accounted for 74 percent of sales in 2006.

Fiat held the top spot in Brazils passenger car market in 2006, Manes said, with 28 percent. It is followed by GM (25 percent), VW (24 percent), Ford (8 percent), PSA Peugeot Citroen (5 percent), and others (10 percent). Fiat likewise lead in light commercial sales, with 25 percent of the market, followed by Ford (23 percent), GM (14 percent) VW (16 percent), Toyota (10 percent), and others (12 percent).

Autos in Mexico, Argentina
Mexico is home to 11 companies that assemble vehicles, with capacity to produce about 2 million vehicles a year, and 1,000 auto parts companies, Manes said. Mexico ranks tenth worldwide in vehicle production, twelfth in internal sales, and ninth in exports. GM leads in both vehicles manufactured and sold. Mexico exports more than 70 percent of its production, primarily to North America.

Argentina has 10 companies with total capacity to assemble 500,000 vehicles annually, plus about 170 auto parts companies. It ranks twenty second worldwide in vehicle production, Manes said.

Argentina has recovered from its 2002 crisis, and local sales growth is pushing [vehicle] manufacturing, said Manes. GM, PSA and Ford vie for top spot in manufacturing, while VW, GM and PSA lead in total internal sales. Passenger car sales leadership is disputed between VW and GM, while truck sales leader is Mercedes Benz, followed by Ford, VW and Iveco.

Fuels and Lubes
Many of Latin Americas countries have adopted Euro or U.S. emissions standards. Argentina will require Euro IV compliance for new models beginning in 2009, and for all models in 2011. In Brazil, Proconve emissions standards similar to Euro IV go into effect in 2009. And in Mexico, Euro IV-level standards are effective next July. These and other emissions standards will require a move to low sulfur fuels, but there is a heated debate as we get closer to the 2009 phase in, Manes acknowledged, because of the large refinery investments required to comply. It isnt clear how much low sulfur fuel will be available, he noted, presenting a challenge to automakers.

Turning to lubricants, Manes noted that Latin Americas base stock needs are mainly sourced by Latin American production, all Group I, with imports covering remaining demand. Low quality dominates in both the heavy duty and passenger car finished lubricant markets, he continued. However, there are two big lubricant issues for Latin Americas automakers: fuel economy and sludge issues.

The need to help improve fuel economy has resulted in introduction of lower viscosity lubricants. Several engine manufacturers are now using 5W-30 oils as their factory fill, Manes said. The regions severe operating conditions contribute to sludge issues, as does fuel with sludge precursors. This presents a particular problem for the small one-liter engines common in Brazil.

Coming challenges for both auto and lubricant companies, in addition to fuel economy and sludge, include concern about soot handling capability of heavy duty lubes; biodiesel compatibility; the need for lower SAPS lubricants for exhaust system aftertreatment compatibility; and the growing need for nonconventional base stocks.

Latin Americas auto industry is poised for more growth, Manes concluded. Both passenger car and heavy duty lubricants required by the new engines will encourage the growing use of Group II and III base stocks throughout the region, although technological challenges face automakers and oil companies who face tougher emissions legislation.