Panorama 12 Brazil Automotive Guide 2008
Although consolidated, and prominent amongst the largest global producers, the Brazilian automotive industry wants more: to be even better. The automotive industry installed in Brazil is going through a particularly significant period. The sector has just celebrated two important achievements: 50 years of history, counting from production of the first vehicle made in the country, in the middle of the last century, and accumulated production of 50 million units, including automobiles, light commercial vehicles, trucks, buses and agricultural machinery. In addition, in 2007 domestic sales reached nearly 2.5 million vehicles, exports were worth over US$ 10 billion and production was around 3 million vehicles. 2008 Br a z i l Au t o m o t i v e Gu i d e 13
In all, assemblers and manufacturers of autoparts invested US$ 35 billion in Brazil from 1994 to 2006 14 Brazil Automotive Guide 2008 These figures put Brazil amongst the largest vehicle markets in the world, and make the Brazilian automotive industry one of the largest in the world. Worthy of special attention is the fact that of the approximately 2.4 million automobiles and light commercial vehicles sold in Brazil in 2007, over 80% rolled off the production lines with flex fuel engines, which run on ethanol or gasoline in any proportion. This is unique. Over four million Brazilian drivers can now choose which fuel to fill up with, either ethanol or gasoline. Benefiting the environment, most people opt for ethanol, which is cheaper per kilometer driven in Brazil than gasoline. Forecasts indicate that by the end of 2008 the Brazilian fleet of automobiles and light commercial vehicles equipped with flex fuel engines will be close to seven million units. It has also been forecast that by 2015, at the latest, over half the fleet in Brazil will be have these engines. Most of the large global vehicle Worldwide vehicle production 2006 Country 1 Japan 2 United States 3 China 4 Germany 5 South Korea 6 France 7 Spain 8 BRAZIL 9 Canada 10 Mexico Sources: Anfavea/Oica Thousand units Volume 11.484 11.264 7.189 5.820 3.936 3.169 2.777 2.611 2.572 2.046 producers have industrial plants in Brazil. There are 25 assemblers supplied by over five hundred systems providers or components producers, all supported by a network of 4,077 vehicle resellers spread around the entire country. Heavyweight sector There are 46 agricultural vehicle and machinery plants installed in eight States and 27 cities. Together they have a production capacity of 3.5 million vehicles and 98,000 agricultural machines a year. Practically all the assemblers and a considerable number of the auto parts manufacturers in Brazil have a solid engineering base focused on the development of vehicles and components for emerging countries, as well as the use of alternative fuels. It is a heavyweight sector in Brazil. Between assemblers and autoparts manufacturers, it accounts for 18.5% of industrial production and 4.9% of Brazilian GDP. It employs 1.3 million people directly and indirectly. Last year its exports totaled US$ 20 billion, producing a trade surplus of US$ 10.4 billion. Backed by the quality and reliability guaranteed by 50 years ex-
It is a heavyweight sector in Brazil. Between assemblers and autoparts manufacturers, it accounts for 18.5% of industrial production and 4.9% of Brazilian GDP. It employs 1.3 million people directly and indirectly. 16 Brazil Automotive Guide 2008 perience in production, 50 million units produced, and a competent lo cal engineering base, vehicles and components manufactured in Brazil now circulate on all continents. In all, assemblers and manufacturers of autoparts invested US$ 35 billion in Brazil from 1994 to 2006. A new cycle of investment is already in place to prepare production capacity for both vehicles and components for the new domestic market, which has been growing fast. In 2007 sales in Brazil of automobiles and light commercial vehicles rose by over 25%, whilst truck, bus and agricultural machinery sales rose by over 30% year-on-year. The basis for this significant growth is Brazil s political and economic stability, with inflation kept under control at below 4% a year, at the same time in which the country s international reserves in dollars have quadrupled in value. All of this has allowed the Central Bank to slash basic interest rates and so open up the way to sustained Gross Domestic Product growth by an average of 4% a year. Such a situation has contributed to boosting employment and thus consumer confidence. Fifth largest in 2010 Added to this favorable situation for the specific case of the vehicle market, above all automobiles and light commercial vehicles, is the significant lengthening of average finance repayment plans, which have been stretched from under twenty months in 2006 to close to forty in 2007. In practice, over 2007 assemblers and manufacturers of autoparts have had to frequently revise upwards sales and production forecasts. It has not been uncommon for companies to reach the end of the year with their industrial units working 24 hours a day, seven days a week, at maximum installed production capacity. The consensus for 2008 amongst assemblers and manufacturers of autoparts is that Brazil has all the conditions needed to maintain growth of its domestic vehicle market at levels in excess of those forecast for the Gross Domestic Product over the next three to four years, of 4% to 5% a year. This means that there are real chances that by 2010, at the latest, the Brazilian vehicle market will have overtaken those in France, Italy, and the United Kingdom, positioning itself, therefore, as the fifth largest market in the world. Socioeconomic Data Country: Federative Republic of Brazil Total Land Area: 8,514,876 km 2 Population (2007): 183.9 million Density: 22 people/km 2 GDP (2006)*: R$ 2.333 trillion (up 3.8% on the year before) Per Capita Income (2006)*: R$ 12,491 Federal Capital: Brasília Number of States: 27 (including the Federal District) Number of Municipalities: 5,564 Governmental System: Presidential Currency: Real (R$) National Agricultural Harvest (forecast for 2008): 137,084 million tons Cargo Transport Matrix (2005): Highway: 58% Railroad: 25% Waterway: 13% Pipeline: 3.6% Air: 0.4% (*) Preliminary data. Source: The Brazilian Institute of Geography and Statistics (IBGE), and the National Cargo Transport and Logistics Association (NTC).