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The battle for Brazil’s car market

Brazil is suddenly in the spotlight. This is now the world’s fourth largest new car market, having overtaken Germany in the first six months of 2010. On current trends, a level of 4.5 million will be reached by 2014, at which point vehicle sales in Brazil would exceed those in the current number three market, Japan.

Toyota is the latest OEM to reveal its Brazilian ambitions, having just announced a revival of plans for a 70,000upa “compact car” plant at a greenfield site in the state of São Paulo. Having purchased the land in 2008, Toyota put the project on ice as the global financial crisis took hold. The facility, now due for completion in 2012, is likely to build the Etios, the small sedan and hatchback range that will have its global debut in India in a few months’ time.

While Toyota remains a minor player in Brazil (less than 2.5% of the market in January-June 2010), that is certainly not the case with its rival Volkswagen. In fact, this could soon become the number two global market for the VW brand: in the first half of 2010, VW do Brasil’s sales (279,851) lagged those in Germany by only 56,044 units.

In June, Fiat sold 10,000 more cars in Brazil than it did in Italy

Volkswagen’s Polo-based Gol, the Brazilian market’s best selling vehicle, is under threat, however. Production of Fiat‘s new Uno is starting to ramp up, while a replacement for the larger Palio will follow within the next 12 months. VW is set to reply with a new Fox, plus more Gol-based models such as a successor for the Parati wagon.

Having lost out to VW in 2009, Fiat has recently regained the title of Brazil’s number one brand. This thanks mostly to the Novo Uno, which cleverly uses a low-cost, re-engineered platform from the original 1990s Palio (178 Evo). Despite having only been launched a few weeks previously, by the end of June, the Uno had become Brazil’s second best selling model with over 19,000 units sold.

Fiat Novo Uno

With Brazil now consistently the Fiat brand’s largest national market (some 10,000 more cars were sold there last month than in Italy), the company is facing an unusual problem: an acute shortage of production capacity.

Fiat’s huge plant at Betim in the state of Minas Gerais, already running flat out, will somehow have to find a way of raising output, and soon. Replacements for the Palio and Siena are due in 2011, while impending local production of the larger Bravo model, which has been delayed for several years, means that Betim must be either greatly expanded or a new plant built.

With only 15,000 cars between them in H1, Volkswagen, Fiat or Chevrolet could be market leader in 2010

While Fiat and Volkswagen battle it out for market leadership, a growing threat to them each is coming from General Motors. The Chevrolet brand’s elderly, but nevertheless big-selling small cars, the Celta and Classic, will soon be replaced or supplemented by three new models, each of which has the re-engineered S 4200 platform as its basis.

The Chevrolet Agile, a small five-door hatchback, is the first of a new range that GM calls its Viva project for Brazil, Argentina and other regional markets. Next to come will be a small crossover that should share much with the GPiX concept from the 2008 São Paulo motor show, to be followed by a sedan and then, a pick-up.

With so many new models under development, Brazil’s big three brands - Fiat, Volkswagen and Chevrolet - appear to have the market pretty much sewn up. And with fewer than 15,000 vehicle sales dividing them as at the end of June, it’s still too early to predict which will end 2010 in first place.

The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.