Brief history of the Automotive Industry in Argentina (ENG)

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Brief history of the Automotive Industry in Argentina (ENG)

By Alejandro Franco – contact

This is the English version of our article about the history of the Automotive Industry in Argentina – you can read the original in Spanish by clicking here.

Why was the Argentine automotive industry born? One could argue several reasons – from the visionary policy of some ruler of the time to the need to turn Argentina into an industrial power -, but the reality is much less epic. Argentina needed vehicles; and since it could not manufacture them, it had to import them. And in order not to go into debt for life – or spend all the profits from exports -, the simplest solution was to establish the basis for manufacturing them in the country.

Now, however, establishing a national automotive industry is an extremely complex and difficult issue to face. First, it is necessary to create an infrastructure – starting with the basics, which are iron mines and steel furnaces – and then looking at how to set up an automotive factory, which implies logistics, engineering, designers, a production circuit, auto parts, and a vast etcetera. When trying to follow this path, two alternatives were considered: to use a series of stimulus laws to attract foreign manufacturers to set up local plants… or, the second case, which was to use the state as the driving force behind the activity, which meant creating a state-owned automotive industry. In Argentina, both recipes were tried with varying success, until the definitive formula was found during the Frondizi government in 1958.

Until the boom of the late 1950s, Argentina had serious problems with its vehicle fleet. It was outdated (the average vehicle was 20 years old), inefficient, insufficient to meet the needs of the country’s population, and excessively expensive to maintain. Much of the drama came from abroad, precisely from the ravages caused by World War II. Neither Europe nor the United States was interested in investing abroad. Europe needed to rebuild its cities and factories, and the United States wanted to recover its domestic market, which had been frozen during the war years. Absorbed in their own affairs, there was no room to deal with what Argentina offered/needed. And since there were no spare parts (either because nobody in the First World was selling them, or because they were for vehicles that had ceased to be manufactured decades ago), the local mechanics had to appeal to their ingenuity to patch up the outdated vehicles that circulated on Argentine streets and roads, manufacturing auto parts by hand, an emergency measure that worked for a while since they lacked the quality and durability of the original parts.

Seducing a capital… that never arrives

The first attempt to attract investment came from Edelmiro Farrell in 1944. Farrell knows that the end of the Second World War is near, he knows the enormous profits that the sale of food and raw materials to Great Britain – essential for the island to survive the incessant blockade of the Nazi submarines – and he thinks that, in a peaceful world, investors will go out to hunt for opportunities all over the world. This is how Decree 14,630 (later transformed into Law 13,892) was born, which was a basic system of industrial promotion. It covered numerous areas, ranging from the production of raw materials, strategic materials for defense, to a series of stimulus measures for the establishment of the automotive industry. In the middle is the construction of the Altos Hornos Zapla, the first iron and steel plant in Argentina, which will not be ready until 1946.

But Farrell’s Industrial Promotion Regime fails to take off. The attention of the First World is focused first on its own countries, and then on the growing threat posed by the Soviet Union. Since the United States could not leave an impoverished Europe to become the pasture of communist ideals, it implemented the Marshall Plan, and funds for European reconstruction abounded. Europe must return to rapid, sustained growth and rebuild its military in the face of the latent red menace.

Hispano-Argentina P.B.T., a prototype of a popular economy car presented in 1939 (with a certain resemblance to the Volkswagen Beetle)

Hispano-Argentina P.B.T., a prototype of a popular economy car presented in 1939 (with a certain resemblance to the Volkswagen Beetle). The reality is that there were always entrepreneurs who manufactured cars in Argentina, but they never went beyond making limited batches until financial constraints finally strangled them. Of all those that existed, Hispano-Argentina was the most promising because it had foundry capacity and engine design, something that separated them by far from the rest (which always ended up bringing engines from Europe), and even became suppliers of trucks (with their own design) for the Argentine Army. What ruined Hispano-Argentina‘s plans was that the raw materials they used came from abroad, something that was cut off with the beginning of the Second World War, and forced them to change their line of business, becoming firearms manufacturers (now known as Ballester Molina). Anyway, it would be naive to imagine that, if the war had not happened, Hispano-Argentina could have become a giant like IKA. Its production was handcrafted, it needed a supporting infrastructure – from auto parts to the constant supply of good quality Argentine steel, something that did not exist in the 1930s – and even a huge financial backing to manufacture in large quantities and reconvert its factory to mass production.

It was in this context that Perón came to power in 1946. To give more impetus to the regime devised by Farrell, Perón decided to put his hand in directly and used his contacts with the Old Continent. Thus, he establishes relations with Piero Dusio, a former race car driver who knows half the world in the European automotive industry, to whom he gives a blank check to establish Autoar in 1949. In theory, Autoar should be the first Argentinean car factory designed for mass production… but the whole move ends up being a trick: until the day of its closure in 1963, Autoar will spend its time assembling cars, bringing bodies from Europe, painting them, giving them upholstery and seats of national origin, and putting the first engine it finds available at hand. And the first thing he does is to cannibalize Willys Jeeps in poor condition, bought by the Argentine State at bargain prices as war surplus, from which he removes the engine and puts them in Fiat 1400 bodies, which he offers as Autoar sedans.

Not only was this totally out of keeping with Peron’s intentions, but Autoar‘s production numbers were disappointing. At best, a few hundred units a year were assembled. This was a far cry from Perón’s dream of being able to produce tens of thousands of vehicles annually and motorize most of Argentina’s population in a matter of a few years.

Now Perón is going for the second attempt. The person responsible for the idea is Brigadier Juan Ignacio San Martín, who proposes Perón to use the Instituto Aerotécnico de Córdoba to start producing cars. But although the facilities in Cordoba have the engineering and industrial capacity, on the other hand, the configuration is inadequate. It is a factory to build airplanes, not an industrial facility with a serial assembly line as used by large car factories around the world since Henry Ford invented the method at the beginning of the 20th century. And to reconvert it and make it fast and efficient would require investing a fortune… which the country lacks at the moment.

Even so, the IAMEIndustrias Aeronáuticas y Mecánicas del Estado, created on the basis of the Instituto Aerotécnico de Córdoba – managed to produce the Justicialista line of carssedan, van, chatita -, which do count as authentic cars 100% built in Argentina. In order to produce them in a short period of time, San Martín and his people have taken shortcuts and this results in a low quality of the vehicle obtained. They have taken a handcrafted pickup that was sold in Buenos Aires in 1945 – the Castanito – and given it a modern look and interior… even though it has an old two-stroke engine based on a DKW engine from the 1930s. The construction is still handcrafted, welding piece by piece the molded metal over the final bodywork. The quality of the sheet metal is too soft and bends easily. But, even with all this, it is a continuous production and designed entirely in the country. In addition, there is the popular Rastrojero (which will come with a wide variety of engines, according to what was available in stock), a sports car designed to show off at international exhibitions (the Justicialista Gran Sport), the Pampa tractor and the Puma motorcycle.

The numbers are not enough

Neither Autoar nor IAME are enough to supply the Argentine domestic market. Faced with 14 million Argentines, only a few thousand vehicles are produced each year. That is when Perón sent emissaries to the United States to tempt them to settle in Argentina. But the Detroit Big Three GM, Ford, Chrysler – were not interested in the proposal. The only one who expressed interest was Henry J. Kaiser, who had seen how it was more profitable for him to set up industries abroad than to try to compete with the Detroit giants in the fierce American domestic market. Obtaining a quota of facilities and important benefits, he decides to move his factory, Kaiser Motors, to Argentina. The year was 1954.

To believe that all this is a question of solidarity or sympathy with the Peronist government would be naive. The installation costs are assured by the Argentine state. Since the domestic market is barely exploited, the situation of Kaiser (which became Industrias Kaiser Argentina, IKA) will become predominant. Now Kaiser has a market of 14 million people to whom it can sell its products with little or no competition, since the rest of the vehicles are more expensive because they are imported. And, on the other hand, the profit margins are higher.

But Perón fell in September 1955. He was succeeded by the Revolución Libertadora, a military movement with a staunch anti-Peronist policy. This led to changes in the composition of IAME. The Justicialista cars are renamed and definitely shelved in a few years. The Rastrojero survives because it is a sales success and because everybody needs it. They do not even dare to touch Perón’s agreement with IKA, which would be tantamount to scaring off future foreign investments in the country.

The production of IAME and IKA has developed an autoparts circuit that is in progress. Soon, other companies interested in setting up in our country began to appear. But what finally gave the final impulse to the Argentine automotive industry was the arrival of Arturo Frondizi to the power in 1958. In December of that year, Frondizi enacted laws 14.780 and 14.781, which gave birth to an improved industrial promotion regime. There are loans, tax exemptions and a fixed term for the factories that settle in our country to produce vehicles with an integration rate of at least 70% of local parts. This move will provoke a euphoria in which the landing of big brands (Fiat, Peugeot, Ford, etc.) coincides with the appearance of a large mass of small local entrepreneurs (Joseso, Dinarg, Alcre, Zunder, etc.) who believe that the 1958 industrial promotion regime is a golden opportunity to become millionaires quickly. But all these small industrialists will end up perishing in less than 10 years, due to their lack of expertise in the commercialization of vehicles, their scarce economic support and their impossibility to comply with the national production quota required by law.

Chronology – history of the Argentinean automotive industry

1910 – the engineer Horacio Anasagasti creates the first Argentine car, made with french Ballot engines. It is a handcrafted production that ceases in 1915 due to economic problems;

1913Ford is established in Argentina. Imports trucks, assembles Ford T in its plant in La Boca neighborhood in Buenos Aires;

1925General Motors arrives. Imports and assembles;

1925Hispano Argentina is founded; produces engines and later cars and trucks in small quantities until the end of the 30’s. Later it will be dedicated to the production of firearms as Ballester-Molina;

1932 – the last of the Detroit Big Three arrives: Chrysler;

1944Edelmiro Farrell’s decree 14,630; first industrial promotion regime;

1945Altos Hornos Zapla is inaugurated, the first iron and steel enterprise in the country;

1945Fábrica Argentina de Automóviles C.C. is inaugurated. Between 1945 and 1947, it will manufacture the Castanito pickup, which in the future will be used as the basis for the Justicialista line of vehicles.

1949Autoar is founded; although its main activity is assembly, it is considered the first national factory of mass-produced cars;

1951 – appearance of IAME, Industrias Aeronáuticas y Mecánicas del Estado; they manufacture Rastrojeros, Justicialista cars, Pampa tractors and Puma motorcycles;

1952Mercedes Benz arrives. First they assemble but in 1959 they start to produce national vehicles;

1953 – the Ciudadano R1 microcar is introduced, produced by Buyatti Ingeniería Automotriz S.A. It is a local venture that fails to attract investors and the car does not go beyond the prototype stage;

1954Kaiser Motors is established in the country and is renamed IKA, Industrias Kaiser Argentina;

1955RYCSA, a metallurgical company dedicated to the production of harvesters and industrial machinery, produces the Gilda sedan, the Gauchito pickup and the Mitzi microcar, based on the Italian SIATA model of the same name. They do not go beyond the prototype stage as they do not attract investors;

1956 – rural Jefe produced by Casa Fehling; it is seen as a refined version of the rural Justicialista, renamed after the coup of the Revolución Libertadora. Last only one year;

1956 – the Revolución Libertadora christens the Institec Graciela (formerly Justicialista sedan) as Graciela W and puts Wartburg 311 engines from East Germany in it. In 1962 they acquired some 311 bodies and it would be produced until 1963;

1958Frondizi extends the industrial promotion regime with laws 14.780 and 14.781;

1958 – entrepreneurs buy bodywork and remaining engines of the Justicialista Gran Sport, change the nose and sell it as Teram Puntero (which looks identical to the Porsche 356 it is called “the Argentine Porsche” -) until stocks run out;

1959Adelmo pickups appear, which use IKA engines; with only 100 units sold, they close in 1963.

1959Ford starts producing utility vehicles. In 1962 it introduces the Ford Falcon, Argentina’s emblematic car par excellence;

1959Isard produces variants of the Goggomobil and is active until 1965;

1959Citroën Argentina S.A. arrives. It starts to produce the 2CV shortly;

1959Siam Di Tella, manufacturer of household appliances, starts to assemble Rileys 4 as Siam Di Tella 1500. As they do not advance with the integration of Argentine parts, the automobile part is transferred to IKA, who founds CIDASA in 1966 and produces cars until 1967, already renamed as Morris and Riley;

1959 – the EKIS dealer network introduces the Koller, with fiberglass bodywork and Wartburg engine. No more than three prototypes are produced;

1959De Carlo, importer of BMW motorcycles, begins to assemble the BMW Isetta 600 and BMW 700; they last until 1965;

1959 – another handmade microcar: the Joseso. They last until 1960. 200 units produced;

1960 – the first blast furnace of the SOMISA plant in San Nicolás de los Arroyos is put into operation; the country has enough steelmaking capacity to supply steel to a growing national automobile industry;

1960Fiat Concord produces its first car, the Fiat 600;

1960Los Cedros S.A. begins to assemble Studebaker pickups (Transtar and Champ); but Studebaker already has serious financial problems at its parent company, so the pickups are produced until 1965;

1960Chrysler – Fevre begins, also manufacturing utility vehicles. Introduces the Valiant V-200 in 1962;

1960Auto Union‘s turn: starts with the Model 1000 and later with a series of combis and pickups;

1960 – the Germans of Goliath / Hansa start producing models, but last until 1961;

1960SAFRAR is born. It had been importing Peugeots 403 since 1956, but in 1960 it produces them locally;

1960 – the Bambi appears, the local version of the Fuldamobil, a European microcar. It is assembled until 1963. Like so many others, it will not end up meeting the national production quotas and the license is taken away;

1960Borgward lands with the B 611 van and the following year with the Isabella sedan. When the German parent company merged, the local subsidiary closed in 1963 (although the van’s matrixes ended up in the hands of IAME and became the Rastrojero Frontalito);

1960 – entrepreneurs build a car with a fiberglass body and Porsche engine, and offer it as the Zunder 1500. Only a couple of prototypes are produced;

1962General Motors arrives and starts producing the Chevrolet Apache (the local name for the C-10 of the time); two years later it will produce the Chevrolet 400, the local name of the Chevrolet Chevy II;

1961Alcre Argentina. But it is still an attempt to sell European Champion cars, which have terrible engineering problems that turn them into death traps when they reach speed – the rear axle breaks -. They barely produce a couple of models to attract customers and then disappear;

1961 – Argentine entrepreneurs found Dinarg and sell the D-200, a hand-built microcar. They last until 1964;

1961Los Cedros S.A. returns and assembles the Heinkel Kabine bubble car – a clone of the Isetta – until 1965;

1961 – Piero Dusio’s second move in the national automotive industry: Cisitalia Argentina. Assembles sports cars based on Fiat models. Lasts until 1962;

These are the most outstanding companies of the period up to the beginning of the 1960s. In the future, Volkswagen, Toyota and some Chinese assemblers will disembark. If one sees the coincidence of closures of enterprises between 1963 and 1965, it is because the State took away their licenses when they were unable to produce vehicles with 70% of auto parts of national origin.