Brazilian Autos Face Tax, Credit Crunches
The largest car
producer in Latin
America, Brazil is a
key market for auto
OEM paint
suppliers.
by Charles W. Thurston
Latin America Correspondent
thurstoncw@rodpub.com
Brazil’s massive auto industry is facing an uncertain constellation of factors that could spell out a slowdown for internationally dominated production and domestic
sales. While the economy struggles with inflation and slower growth, recent government intervention measures have included a tightening
of consumer credit through higher interest rates,
and an ominous tax on imported vehicles not
meeting local content requirements.
Brazil is the largest auto manufacturer in
Latin America, so the fate of the industry
would directly impact international paint line
suppliers. As it stands, Brazil’s automotive
paint industry is predicted to grow by three
percent this year and four percent next year,
according to an August survey by Associacao
Brasileira dos Fabricantes de Tintas (Abrafati),
the national paint association.
Of the various threats to the auto industry,
the local content import tax—announced in
September at 30 percent—may do more to curb
new investments than to stifle original equipment manufacturers (OEM) already established
in the country. A rumor subsequently circulated
in Sao Paulo, the center of Brazil’s auto manufacturing industry, that Japanese representatives
to the World Trade Organization would seek redress to the import tax there. The tax would be
levied on vehicles not containing 65 percent of
value produced in the Mercosul region, which
formally includes Argentina, Uruguay, Paraguay
and Brazil. Associate member countries include
Bolivia, Chile, Colombia, Ecuador and Peru,
and Venezuela has initialed but not completed a
membership agreement.
According to the Associacao Nacional dos
Fabricantes de Veiculos Automotores (Anfavea),
the national trade association, auto production
during the first three quarters of this year was
up 3. 4 percent, while auto registrations were up
10. 6 percent, with the latter fueled increasingly
by imports. Anfavea predicts a five percent in-
crease overall in sales this year.
Exports, similarly, were up four percent to
386,000 units over the first three quarters this
year, compared to 370,000 units in the prior-year period. Nissan has predicted that Brazil
will become the world’s third-largest automaker by 2015, following the United States
and China. Brazil’s domestic sales are approximately four times than those in Mexico, at
nearly 2.7 million units over the first three
quarters of this year.
Brazil is the largest
auto manufacturer in
Latin America, so the
fate of the industry
would directly impact
international paint line
suppliers.
Among recent investment announcements,
Renault indicated it would spend $856 million
in Brazil over the 2010-2015 period, to increase production to 383 million units per year.
Similarly, Chinese automaker Anhui Jianghuai
Automobile (JAC) announced in early October
that it would invest $500 million to build its
first manufacturing plant in the country and its
first outside China, at Camacari, in Bahia state,
where Ford has a large operation.
The factory, slated to open in 2014, will have
the capacity to produce 100,000 units, JAC said
in a statement.
Consumer credit tightening also could dampen
domestic sales, since about two-thirds of all sales
are financed, one industry source suggests. High
interest rates and limited competition among auto
dealers result in markedly higher prices for Brazilian auto buyers than for buyers in neighboring
countries. Similarly the devaluation of the national
currency, the real, over the past several months,
will also drive up imported car prices. CW
