Brazil's auto market is on a roll

Brazil's auto market is on a roll, attracting investment dollars

Brazil's automotive industry growth rate is approaching Amazonian proportions. Year after year, South America's largest marketplace has been steadily expanding its domestic sales, production and export presence.

From January to November of 2007, 2.7 million cars, trucks and buses rolled off the nation's assembly lines, according to Anfavea, the Brazilian National Association of Vehicle Manufacturers. The organization forecasts a 9 percent production increase for 2008, plus a 17.5 percent boost in sales; Brazil's population of 188 million — the fifth largest in the world — also buys auto products imported from elsewhere.

Miguel Jorge, Brazil's industry and trade minister, anticipates that the auto industry will invest $15 billion over the next three years to expand manufacturing capacity for component production while annual completed-vehicle output is expected to reach 5 million units.

Ford's Brazilian sales rose 20.7 percent in 2007, and this year the company is introducing the Edge crossover model into the market along with a new Novo Ka subcompact.

"Ford is on a roll in South America," says Mark Fields, company president for The Americas. "The Ford showroom in Brazil will offer the widest range of choice for customers in our history," he adds. The automaker plans to invest $1 billion in its Brazilian operations over the next four years.

General Motors, which has been in Brazil since 1928, is adding a third shift and 600 new jobs this year at its São Caetano do Sul plant. GM Brazil is also building a new $200 million engine and parts production factory in Joinville City that will employ 500 people when it opens in 2009.

"The plant is part of GM Brazil's strategy to place facilities in the most advantageous locations, and Joinville City provides a fantastic infrastructure and has highly skilled labor," says José Carlos Pinheiro Neto, division vice president.

"The decision to build a new engine plant in Brazil is essential to our ability to expand vehicle production capacity throughout the Mercosul Region," explains Jaime Ardila, GM Brazil president. (Mercosul is a governmental trade alliance consisting of Brazil, Argentina, Uruguay and Paraguay.) The company's Brazilian and Argentinean operations will receive an overall $500 million in additional funds.

Renault Brazil and Nokia Brazil have recently joined forces to offer technologically savvy Brazilians a special edition Sandero Nokia, the country's first compact vehicle that comes factory-equipped with GPS. The package includes a host of other integrated electronic accessories.

"This car will appeal to a target audience of young, energetic males who want the industry-leading mobile technology of Nokia combined with the quality of a Renault Sandero," says Rodrigo Link, Nokia Brazil's manager of enhancements sales.

Kenwood Corp. has announced its own plans to sell auto electronics directly to the retail marketplace as trading partner Visteon concentrates on the car dealer segment.

A contingency of officials from the Specialty Equipment Market Association (SEMA) on an industry trade mission last year found that Brazilian consumers display a strong urge for adding appearance and performance products to their vehicles. They especially covet sound systems, video screens, robust suspensions and bodywork alterations.

(The paint color of choice among Brazilian motorists happens to be silver, capturing 34 percent of the market, according to the DuPont 2007 Global Automotive Color Popularity Report. Black ranks a distant second at 23 percent followed by gray's 15 percent favorability rate. In the U.S., white/white pearl takes the top spot with black closely behind.)

"Our friends in Brazil have a passion for the automobile that rivals that of the United States," reports SEMA Chairman Jim Cozzie.

"It was exciting to see the high level of not only vehicle customization, but also the diversity of vehicles being customized," says Wade Kawasaki, chairman of the association's international task force. The group admired American-style muscle cars, hot rods and even rat rods amid a proud Brazilian populace. The Japanese tuner market is also well represented in this multi-cultural nation.

"The passion for our industry and for SEMA-member products was phenomenal," Kawasaki recounts. "As this financial leader of South America continues to grow, we need to put more of our members' products in front of their developing and growing middle class."

Cozzie is intrigued with the nation's widespread acceptance of renewable fuels. "Ethanol is available at every fueling station in Brazil and is half the cost of gasoline there. I see big opportunities for U.S.-based companies in the development of performance products for domestic ethanol-fueled vehicles in the next two to three years."

The U.S. Commercial Service suggests that American entrepreneurs form joint ventures or other alliances when entering into the marketplace. Brazil has a relatively stable government, but navigating the cultural peculiarities can be a challenge if you are unfamiliar with the way Brazilian business operates. (For one thing, the dominant language is Portuguese. Although similar to Spanish, there are key grammar and pronunciation differences that can make communication difficult.)

SEMA seems to be on top of the governmental intricacies facing the industry. As part of its ongoing international relations efforts, association leadership has been working closely with ASSOBRAVA — the Brazilian Association of Manufacturers, Distributors and Dealers of Equipment and Accessories for Automotive Vehicles.

Despite the booming market and the potential it brings for American auto parts purveyors, the SEMA team assails "restrictive and non-transparent laws" that place a damper on an otherwise viable industry. They are trying to work with government officials and ASSOBRAVA to alleviate the situation.

Kawasaki would like to see American industry participants uniting with ASSOBRAVA members to facilitate "fanning the flames of their burgeoning automotive accessories/racing market and guiding them from unfair legislative and regulatory pressure."

Contacts:

ASSOBRAVA

(Brazilian Association of Manufacturers, Distributors and Dealers of Equipment and Accessories for Automotive Vehicles)

Rua Itamarati, n 55

Pacaembu - São Paulo SP 01234-030

55 11 4508 4002

http://www.assobrava.org.br/en/index.htm

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