This was expected, and a positive year is about to end for the motor vehicle market in Brazil. Anfavea’s start-of-year forecast to produce 2.41 million vehicles in 2017 has already been substantially exceeded (2.48 million vehicles were produced from January to November) and the year is expected to close with a growth of 25/30%.
A strong contribution to this performance came from exports (700 thousand vehicles from January to November), up 53% compared to the same period of 2016. According to Anfavea president, Antonio Megale, this result should be consolidated in 2018 thanks to the commercial agreement Brazil-Colombia that should be signed in the coming weeks.
The figure for new registrations was also positive, which in the period January-November 2017 exceeded the threshold of 2 million and grew by 9.8% compared to the same period of 2016.
However, the sector is still far from recovering production levels that justify the installed capacity in the country. In Brazil there are 31 manufacturing companies with 67 industrial units and an installed capacity equivalent to an annual production of 5 million vehicles. Considering that the production of 2017 should be around 2.7 million vehicles, there is a idle production capacity of almost 2.5 million vehicles, which is a major problem for companies.
A more detailed analysis will be carried out in February, when the final data for 2017 will be available.
Let’s see some historical series:
In 2013 the sector reached its all-time high, with 3.71 million vehicles produced. A growth that would have led to production close to 5 million vehicles was planned for the following years, which is why many companies have decided to expand production (GM, FCA, Hyundai, Man, Toyota, Nissan and Volkswagen) or inaugurate its presence in Brazil (Chery, BMW, Audi, Mercedes and Jaguar / Rover).
A fundamental reason that pushed companies to invest in Brazil was the “Inovar-Auto” program, introduced at the beginning of 2013 by the Dilma government and aimed at encouraging productive investments in the automotive sector, imposing a surcharge on imported vehicles. . The “Inovar-Auto” program has recently been declared illegal by the WTO and ends in the last quarter of 2017: it remains to be seen whether and how the new government will replace it, bearing in mind that without the surcharge on imported vehicles it will be difficult to incentivize companies to make new investments in Brazil.
As can be seen from the above graph (source: Anfavea), in 2011 the quantity of imported vehicles reached the record value of 857 thousand units (or 23.6% of the market). The subsequent fall in imports is due to three factors:
– the introduction of the “Inovar-Auto” program, which has increased the prices of vehicles imported to the consumer
– the onset of the economic crisis, starting in 2014
– the devaluation of the real, starting from the beginning of 2015
Exports, specularly, have increased with the onset of the devaluation of the real and with the stipulation of international agreements, mainly with Argentina and Mexico.
Truck production fell from 2013 to 2016, with a decrease of almost 75%.
The economic crisis, accompanied by the effects of the Lava-Jato operation, has virtually blocked the large public infrastructure works and the civil construction market, which are two major sources of truck purchases.
2017 should be an excellent year for agricultural production, which should stimulate the purchase of new vehicles (even if there is a very large fleet of vehicles that are used very heavily).