Skip to content

Stimulus programme is a boost for Brazil’s LV market

Cumulated sales in the first eight months of 2012 were up 6.9% year-on-year – an impressive performance, given that Brazil’s GDP in the first half of 2012 grew by just 0.6%. The Brazilian government’s stimulus programme led to vehicle sales in August reaching an all time record of 405,000 cars and light commercial vehicles. The … Continued

Cumulated sales in the first eight months of 2012 were up 6.9% year-on-year – an impressive performance, given that Brazil’s GDP in the first half of 2012 grew by just 0.6%. The Brazilian government’s stimulus programme led to vehicle sales in August reaching an all time record of 405,000 cars and light commercial vehicles. The last three months (June to August) saw light vehicle sales reach 1.1 million units, a 36.6% improvement from the previous three months (March to May) when 803,000 light vehicles were sold.

The stimulus programme was put into place late May and was initially intended to last three months, expiring on 31 August. However, since the economy is still slowly picking up, the government decided last week to extend it until the end of October.

Brazil’s stimulus programme led to vehicle sales in August reaching an all time record of 405,000 cars and light commercial vehicles

The key aspect of the programme that fuelled new vehicle purchases was the easing of the Industrial Product tax (IPI). This resulted in the cancellation of IPI tax for engines up to 1.0-litre and a 50% cut in the IPI tax for engines between 1.0 and 2.0 litres, dropping the IPI for ethanol/flex engines to 5.5%, and for gasoline engines to 6.5%. The commercial vehicle IPI tax was reduced from 4% to 1%.

In addition to the easing of the IPI tax, financing costs and interest rates were lowered. These actions contributed to an average price reduction to the customer of 10%. Vehicle manufacturers also committed to maintain existing levels of employment.

Vehicles imported from outside the Mercosur region and Mexico continue to be subject to the additional 30% IPI tax which was implemented in December 2011. Imported vehicle sales by brands with no local manufacturing were hit hard by this additional tax, which resulted in a 25% year-on-year fall in sales in the first seven months of this year.

Despite brought-forward sales, Brazil’s full year sales results for 2012 should still show a 5% improvement over 2011

However, while the stimulus programme has proven to be effective in the light vehicle segment, this has not been the case in the heavy vehicle segment, where sales of trucks and buses remain slow, with a further drop of 15% expected this year. This is in part due to the pre-buy effect in 2011 ahead of the introduction of Euro 5 emissions regulations in January 2012; however, the main reason is the slower economic growth in the first half of the year. Heavy vehicle sales are much more sensitive than the light vehicle segments to overall industrial and economic growth. While Brazil’s total GDP was up 0.4% in the last quarter, the industrial sector was down 2.5%.

In terms of Brazil’s economy in general, the second half of the year looks set to present better results than the first, and the year-end GDP is forecast to grow 1.6%. The impressive growth of almost 37% in light vehicle sales during the last three months should slow in the latter part of this year, with many buyers having brought forward vehicle purchases to make the most of dealer discounts. Nonetheless, despite these brought-forward sales, Brazil’s full year sales results for 2012 should still show a 5% improvement over 2011.

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

Julian Semple is a Senior Consultant and Manager at CARCON Automotive in Sao Paulo, Brazil.

Julian Semple’s eight years as an automotive industry consultant were preceded by 27 years in automotive industry management positions, with responsibility for business strategy, cost management, manufacturing and product development at large corporations including Visteon and Ford in South America and North America.
Learn more about CARCON Automotive at www.carcon.com.br
Telephone: +55-11-2355-5873           E-mail: jgsemple@carcon.com.br

The AutomotiveWorld.com Expert Opinion column is open to automotive industry decision makers and influencers. If you would like to contribute an Expert Opinion piece, please contact editorial@automotiveworld.com

https://www.automotiveworld.com/articles/commercial-vehicle-articles/95781-stimulus-programme-is-a-boost-for-brazil-s-lv-market/

Welcome back , to continue browsing the site, please click here