Brazil's automotive market shows signs of recovery as economy bottoms out

2017 vehicle sales expected to grow to 2.13 million units, up 4% from previous year

2017/09/08

Summary
Sales for January-July 2017 grow to 1.2 million units, up 3.4% year-over-year
Light vehicle market: GM, FCA, and VW continue to lead despite eroded share
Government announces new Rota 2030 policy and renews automotive pacts
Expansion of production facilities
Top OEMs: GM, FCA, and VW
Other U.S. and European OEMs: Renault, Ford, BMW, Daimler, and JLR
Japanese OEMs: Toyota, Honda, and Nissan
Chinese OEMs: JAC Motors and Chery
Sales Forecast by LMC Automotive: Brazilian sales to grow to 2.38 million units in 2020

Summary

Brazil's economy is showing signs of bottoming out amid marked positive real GDP growth in the first quarter of 2017, for the first time in nine quarters over the two-year recession period. While political uncertainty, including President Temer's corruption scandal, remains, the country's economy is gradually recovering. Brazil's automotive market showed indications of revival as new vehicle sales rose 3.4% year-over-year (y/y) for the period from January to July 2017, after sales had declined for four consecutive years. The Brazil National Association of Motor Vehicle Manufacturers (ANFAVEA) forecast in July 2017 that the total sales for 2017 are expected to increase by 4.0% y/y to 2.13 million units.

Although OEMs had been cutting production and personnel at their manufacturing facilities in Brazil during the economic downturn, they started increasing production and investment again from the beginning of 2017. According to ANFAVEA's forecast released in July 2017, production for the full year is expected to grow by 21.5% y/y to 2.61 million units, of which exports is projected to account for 710,000 units, up 35.6% y/y.

When looking at the light vehicle market share in Brazil for the January-July period of 2017, GM, FCA, and VW maintained their leading status. However, FCA and VW have lost significant shares compared to 2012 when their overall sales peaked, while shares for Hyundai, Toyota, and Honda have increased. In terms of passenger car sales rankings, subcompact models such as GM's Chevrolet Onix, Hyundai's HB20, and Ford's Ka took highest honors. Among the small SUVs, of which sales are quickly growing, Honda's HR-V, FCA's Jeep Renegade, and Hyundai's Creta respectively occupied the top three positions.

In April 2017, the government of Brazil revealed its new automotive policy titled Rota 2030 which is slated to be introduced in 2018. It will establish a long-term vision covering a period of 15 years and include clear rules for the security of investments to enhance the competitiveness of the domestic industry.

Regarding the expansion of production facilities, JLR has started operations at its first plant (annual capacity: 24,000 units) in Latin America as of June 2016. Toyota opened its first engine plant (annual capacity: 108,000 units) in the region in May of the same year. In addition, VW plans to invest BRL 2.6 billion to introduce a new assembly line for small models adopting the modular strategy MQB, GM will spend BRL 4.5 billion on three of its plants to build new models, and Renault will invest BRL 750 million to expand its engine production facilities.

Brazilian vehicle
production and exports

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