Brazil Autos Report Q2 2008

Brazil's automotive industry posted outstanding levels of growth in 2007 and significant gains have already been made in 2008. That last year's momentum has carried over into 2008 is a positive sign for growth this year, particularly since many of the fundamentals fuelling growth, including a strong economic backdrop, remain in place. As illustrated in BMI's latest Brazil Automotives Report, industry majors continue to step up their activities in the country, in a bid to tap the ongoing opportunities for growth.

Brazil's automotive industry posted some of its best-ever results last year. According to industry data, vehicle production rose by 13.9% year-on-year (y-o-y) in 2007, while sales were up by around 27%. Data from the Brazilian carmakers' association, Anfavea, shows that vehicle sales reached 2.46mn units in 2007, an increase of 27.8% against the previous year. Italian carmaker Fiat stamped its authority on the market last year. The carmaker's Brazilian subsidiary, Fiat Automveis reported a strong 30.8% year-onyear (y-o-y) increase in passenger car sales to 526,828 units. The carmaker was followed by Volkswagen do Brasil (VW), whose sales rose by 30% to 490,489 units. General Motors do Brasil (GM) completed the top three with sales of 463,804 units, up by 26.1%. All the top five players enjoyed significant sales growth last year. US carmaker Ford reported the least increase, of 15.8% to 169,428 units. In January 2008, passenger car sales totalled 162,727 units, a strong 34.5% up on January 2007.

Investment earmarked by Ford for 2008 is arguably the most important this quarter; in that it reflects the significance of emerging markets such as Brazil in carmakers' strategies for growth. In light of dwindling car sales in the US where credit crunch continues to take its toll, carmakers such as Ford have been increasingly looking to grow their businesses in key markets in Latin America. In line with its strategy of international expansion, Ford has announced investment of US$1.6bn (EUR 744mn) for Argentina and Brazil, the majority of which, US$1bn has been earmarked for Brazil. Ford is bidding to boost its sales and financial results in the country, and will expand its product range with the Edge crossover model this year.

Toyota has also unveiled significant investment for Brazil. According to sectors of the Argentine press, the company is seeking to strengthen its position in the Mercosur region with a new, economically-priced vehicle, which company sources say could be the Toyota Yaris. The carmaker is expected to produce the car in Brazil and export 20% of total output to Mercosur countries. As such, Toyota has earmarked investment of US$300mn to build a new plant in Brazil. This development is in line with the country's position on BMI's new Business Environment Ratings Index, where it scores well in light of its geographical position and trade links with surrounding countries.