2010 Year in Review: Brazil

Highlights of the year’s major events affecting Brazil

Barbara McClellan

October 20, 2010

6 Min Read
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Highlights of the year’s major events affecting Brazil:

Auto industry produces 10 millionth flex-fuel vehicle in March.

• Brazil’s auto makers begin bulking up their inventories as the federal government announces early in the year plans to end its tax incentives for vehicle manufacturers at the end of the first quarter. National Vehicles Manufacturers Assn. (Anfavea) President Jackson Schneider says the end of the tax incentives for the industry will have an important impact on production and sales in 2010.

Government aid to auto makers, along with available consumer auto loans, are credited with helping keep the Brazilian economy afloat during the global financial meltdown last year. “Obviously, there will be an effect when prices rise again,” Schneider says, “but I can’t quantify the size of the impact.”

• Peugeot announces it will begin selling a pickup derived from its 206 sedan in Brazil starting in late spring. The small truck, called the 207 Hoggar, is powered by either a 1.4L or 1.6L flex-fuel engine, capable of running on gasoline, ethanol or a mix of the two. It can carry a payload of 1,600 lbs. (742 kg) and offers 40.6 cu.-ft. (1,151 L) of space.

Peugeot says the name Hoggar, taken from a concept car in 2003, evokes “power, strength and action.” Brazil’s small-pickup market is significant. In January, more than 17,000 units were sold, for 7% of the total light-vehicle market.

• Brazil’s auto industry produces its 10 millionth flex-fuel vehicle in March. FFVs, which can run on ethanol, gasoline or a mixture of the two, make up nearly 50% of the domestic market. The first FFV, a 1.6L Volkswagen Gol, was sold for BR1,074 ($600) more than the gasoline version in 2003. Most FFVs are priced the same or less than similarly equipped gasoline-powered cars in the country.

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State of Industry: International

• General Motors says it will build a new small sedan, to be engineered in Brazil, at the General Motors Uzbekistan YoAJ joint-venture plant in Asaka. The car is part of a family of upcoming “global small vehicles for emerging markets,” GM says. The auto maker will sell the small sedan in Uzbekistan, Russia and other Commonwealth of Independent States countries. It also will be built in Brazil for sales in South America, and the lead plant will be in Brazil.

• Ford in early April says it will increase funding for its Brazilian operations from $2.2 billion to $2.4 billion from 2011 to 2015. The expenditure marks the single-largest amount the auto maker has invested in Brazil during a 5-year window in its 90-year history in the country.

The increase takes its outlays in South America to $3 billion through 2015. The bulk of the investment will be directed toward the development of a new EcoSport car-based CUV, which will be produced locally for both Brazilian and export markets. The vehicle, developed at Ford’s engineering center in Camacari, Bahia, will be based on a B-sized platform developed in Europe that also supports the Ford Fiesta.

• The Renault-Nissan Alliance partners with the city of Sao Paulo in May to help make feasible the sale of electric vehicles in Brazil. The auto makers have similar agreements in 40 cities worldwide, but this is the first in South America. The goal of the project is to improve life quality and reduce vehicle emissions in the state capital, but assistance is needed to make the scheme economically feasible.

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2010 Year in Review

• Vehicle-parts makers pressure the government in May to set up a plan to increase quotas on imported components. Brazil’s auto industry is expected to import up to BR6.2 billion ($3.6 billion) more auto parts than it exports this year. In 2009, the negative trade balance in the sector totaled BR4.3 billion ($2.5 billion).

“These are serious problems that we have to solve soon,” Brazil Minister of Development, Industry & Foreign Trade Miguel Jorge says of the trade imbalance. But most of the country’s auto makers are opposed to any kind of quota plan, alleging final costs for car parts will rise and have to be passed on to consumers.

• The Brazilian government launches a study in May to set up guidelines for the large-scale production of electric vehicles. Nelson Barbosa, the Secretary for Economic Policies of the Finance Ministry, says the country lags behind others and faces technological problems in manufacturing EVs.

“It is the duty of the government to stimulate research,” he says. “This study will diagnose what must be done to make electric-powered vehicles a significant part of the country’s car fleet.” EVs are subject to a higher industrial-products tax than other cars, but Barbosa says there is a plan in the works to reduce that levy.

• Brazil sells a record 1.5 million new vehicles in the year’s first half, up 9% from 1.37 million in like-2010, the Association of Brazilian Vehicle Dealerships (Fenabrave) reports. Based on vehicle licenses, deliveries of cars, pickup trucks and vans through June rise 7.3% from year-ago. Truck sales surge 54.7% from like-2009 to 70,800 units, while buses are up 30.3% to 13,100.

Fiat maintains its No.1 position in the first six months with a 22.8% market share, followed by Volkswagen (20.9%), General Motors (20.2%) and Ford (10.3%).

• New-car and truck sales set a monthly record in August, surging 21.2% to 321,800 units compared with year-ago and 3.5% ahead of July, Anfavea says. Production climbed 3.4% from July to 329,092 units, up 11.5% from prior-year, for the second-best record in the country’s history.

• India and Brazil hold bilateral meetings in September to promote cooperation in the production and use of renewable biofuels in India. During a visit to India, a Brazilian delegation visits General Motors India’s vehicle plant to inspect its biodiesel program using jatroha, which is grown on plantations in Gujarat.

Parent General Motors earlier in the year formed an alliance with the Council for Scientific and Industrial Research-run Central Salt and Marine Chemical Research Institute to study the possibility of commercial production of jatropha-based biodiesel, and GM India successfully has test-driven a half dozen vehicles using the biodiesel, supplied by CSMCRI, without any modification to their engines.

• Chinese auto maker Chery says in October it plans to offer flex-fuel engines in all its cars exported to Brazil in second-half 2011. A company official says Chery hired a supplier in Brazil that has developed two types of flex-fuel engines that will be manufactured in China.

The engines will equip cars that Chery will assemble at its future factory in Jacarei, Sao Paulo. A Chery spokesman says production will switch to Brazil once Chery’s sales volume surpasses 170,000 units per year. “The engines should be the first biofuels engines produced in China,” says Luis Curi, president of Chery’s Brazilian operations.

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