Although the 5% growth in Brazil’s new vehicle market in 2012 has been fuelled by incentives, analysts, suppliers and OEMs anticipate further expansion over the coming years. OEMs that are suffering in their domestic markets have announced strategies to expand in emerging countries, including Brazil, where more than US$22bn is being invested between 2010 and 2015 in new plants, expansion of existing facilities and new product launches. The 2012 Sao Paulo International Motor Show got under way last week to a record number of top global OEM executives and journalists, and over 700,000 people are expected to visit the show. At the show, the spotlight shone on some key trends in Brazil’s automotive industry.
Competition is hotting up in the B-segment, which accounts for 50% of the Brazilian market. New locally-built products have entered the segment in the last two months, including the Chevrolet Onix, Hyundai‘s Brazil-specific HB20 and the Toyota Etios.
Although the 5% growth in Brazil’s new vehicle market in 2012 has been fuelled by incentives, analysts, suppliers and OEMs anticipate further expansion over the coming years. OEMs that are suffering in their domestic markets have announced strategies to expand in emerging countries, including Brazil
The compact car and compact SUV segments are also becoming more competitive, with products being offered with additional content. Even smaller new vehicles like the Chevrolet Onix, Ford EcoSport and Citroen C3 are being offered with multimedia, connectivity and safety features not seen in the previous generation of those models.
In the medium pick-up segment, the trucks are getting bigger and more powerful: the new Ford Ranger and Chevrolet S10 follow the segment’s trend, initiated two years ago by the VW Amarok, of growing and adding content and sophistication. Ford, for example, offers the segment’s highest engine power (200hp), and VW offers an eight-speed automatic transmission.
In terms of powertrain trends, flex fuel offerings are broadening. Almost all locally-built vehicles are ‘flex’ (ethanol-gasoline), but this year’s Sao Paulo show has seen an increase in the number of imports with flex fuel engines targeted at the Brazilian market, including the new Ford Fusion, Hyundai i30, Hyundai Elantra and Kia Cerato.
Engines downsizing is on the up, too. The new Hyundai HB20 is the first locally-produced car with a 1.0-litre three cylinder engine, first launched in the Korean-built Picanto. Other brands such as Ford and VW will offer smaller, more efficient engines in the near future.
Brazil is of increasing interest to global OEMs targeting South America in their growth plans. New players, including the Chinese brands Great Wall, Haima and Rely are getting ready to enter the Brazilian market. This is down to the significance of the market, but the investments are also being encouraged by the country’s new automotive policy, which is designed to boost investment in manufacturing, increase local content and reduce vehicle prices, and includes a reduction in the IPI tax.
The excitement surrounding this year’s Sao Paulo show reflects the importance of the Brazilian market to the global automotive industry
Vehicles imported from outside Argentina and Mexico are subject to an import tax of 35%, with an additional 30% industrial tax levied on vehicles that exceed the 4,800 vehicle annual quota, as set by the new 2013-2017 automotive policy. To avoid this heavy taxation, investments are being made in new local factories by OEMs like China’s Chery and JAC Motors, which complement the plants recently opened by Hyundai and Toyota (the new facility at Sorocaba, SP is Toyota’s second local plant). And BMW announced plans this week to construct a new 30,000 upa plant to build the X1 from 2014.
While the new automotive policy is good news for lower volume importers, it hurts the higher volume players. Kia, for instance, imports 50-60,000 vehicles per year and so far has no plans to invest in a local plant or to assemble cars at the local Hyundai facility.
Brazil’s new vehicle market is expanding; with this expansion comes not only the demand for better and more sophisticated products, but also the need for a higher degree of local product development on the part of the OEMs. The excitement surrounding this year’s Sao Paulo show reflects the importance of the Brazilian market to the global automotive industry.
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. Learn more about CARCON Automotive at www.carcon.com.br. Email: jgsemple@carcon.com.br.
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