Flash Reports

Brazil Outlook for the 2017. Recession is not over

Brazil Automotive Industry Land_Rover-Range_Rover_Evoque_Ember_Edition-2017

Brazil Automotive Industry is the largest in the Latin America and the seventh globally (down from the 4th place gained in the 2012) after the severe crisis started in the 2014 and fully in place.

Lower growth, higher inflation and the ending of the Brazilian economic model based on subsidized consumption are having an impact on the whole automotive sector value chain: from the spare parts producers to car manufacturers and sellers. Scarce credit and reduced consumer spending power have hurt overall sales in a market that until recently was expected to be one of the world´s fastest growing car markets.

As well as the economic slowdown, a recent change in security features has increased the price of cars, adding one more stumbling block for sales and also affecting the aftermarket segment. The appreciation of the real has made the import of cars and car parts even more expensive: importing cars into Brazil has always been more expensive due to the high tax rates used to encourage foreign companies to establish local production plants.

A further complication is the low rate of vehicle repossession – 20% – in cases of default. Banks take two years, on average, to conclude the repossession process: one reason why banks are restrictive in granting loans for car purchase. Since this is an important factor in buying a car, a drop in-car loans of more than 10% creates a further slowdown in sales.

Domestic car production is also affected by the deteriorating economic situation in neighboring Argentina: the main market for Brazilian car exports. The trade flow between these two countries is affected by the restrictions on the freeing of dollars in Argentina to pay for its imports.

Against this backdrop, it is unsurprising that margins have been squeezed in an attempt to boost sales volumes. The car industry’s high fixed costs mean that maintaining volumes is essential and this has put pressure on suppliers and spare parts producers that have heavy financial structures and growing debts to service.

Research, Consulting, Data & Forecast Store

F2M covers intensively this market with several products developed to help any investigation required.

Market Researches in PDF are immediately available for download with study on the market since 2005 and with forecast up to the 2022.

Auto Data in EXCEL are immediately downloadable with annual sales volume, split by month, for all brands and all models distributed in the market. This year data are released year to date, but you will receive a monthly update until the year-end.

All these and more within our  Brazil Store

 

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