Abstract
Government intervention in Brazil has helped it stand as one of the strongest
automotive markets in Latin
American. In its Q409 Brazil Autos Report, BMI
examines how individual country governments in the
region have stepped in
to support the industry and how the market has responded to the changes
therein.
In Brazil, the industrial tax break on the auto industry has paid
off with domestic demand rising 3% y-o-y,
to 1.45mn units in H109,
according to reports from just-auto. Although this rate of growth is typically
not
a characteristic of high-demand potential Brazilian market, it makes
Brazil better positioned than the likes
of Argentina and Mexico. The
growth in sales has been mainly led by the anticipated discontinuation of
the aforementioned tax break from July 30, prompting potential buyers to speed
up purchases before the
end date. With the view to maintain this consumer
confidence and to continue the success of the scheme,
the government has
announced the extension of tax break until December this year. BMI, however,
is
cautious that the phenomenon may not be sustained for the rest of the
year, especially if widespread
redundancies begin to dig into consumer
pockets. As such we maintain our forecast of a 4% y-o-y
increase in sales,
to 2.96mn units this year, still remaining pessimistic than National
Association of Motor
Vehicle Manufacturers (Anfavea)’s forecast of a
6.4% y-o-y growth this year.
While the decline in domestic has somehow
been brought under control, Brazil’s auto exports continued
with
their plunge. In light of the weak economic outlook for most of Brazil’s
export destinations, BMI
has revised down Brazil’s autos export
forecast to a 37% y-o-y fall this year to be followed by a marginal
1%
y-o-y recovery in 2010. As exports continue with the freefall, we expect
carmakers to produce only
2.94mn vehicles this year, down from 3.22mn
units produced last year. By 2013, however, Brazil will
showcase its
production potential with output rising to 3.89mn units, clearly having more
than recovered
from its pre-crisis levels.
The strength of its market,
accentuated by favourable government policies, places Brazil in second
position in BMI’s Business Environment Rankings for the autos industry
in Latin and North America.
Although this is a step down from its first
position in our Q309 review, Brazil has increased its score from
63.9
points to 66 points; the latter being a result of improved operating
environment and greater returns
that investors can realise from their
investments in the country.
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