Brazil Autos Report Q1 2013

Passenger car sales in Brazil decreased 5.2% y-o-y in September, to 214,351 units. Over the first nine months of 2012, sales in this segment have increased 7.2% y-o-y, to 2,100,365 units. BMI has long maintained that passenger car sales in Brazil will increase 3.9% over the course of the year. We maintain this view for now, as we believe sales in this segment will moderate over the remainder of the year, and drop in line with our forecast. Earlier in 2012, car sales were boosted significantly through stimulus measures aimed at boosting investment and consumption, including cheaper credit for vehicle loans and tax breaks for domestically produced vehicles. Although the stimulus measures are in place until the end of October, we believe their effects were felt the most in the June-August period, and that their impact will be more subdued in the latter stages. We believe that greater access to credit for vehicle loans will provide some modest increase in sales over the remainder of the year, but not substantially so. Over the long term, we maintain a bullish outlook for the passenger car segment in Brazil, and expect to see strong and sustained growth over the remainder of our 2017 forecast period.

Vehicle production in Brazil increased 8.2% year-on-year (y-o-y) in September, 282,540 units. Over the first nine months of the year, production declined 5.7% y-o-y, to 2,462,873 units. In July, we revised down our vehicle production forecast, to a 5% decrease in 2012, predicated on our belief that the Brazilian economy, with its industrial and vehicle production, will pick up in the second half of the year. This view is continuing to play out, and we maintain our forecast for now.

BMI believes that despite weak Q212 growth, we will see a modest pick-up in economic growth in coming quarters, in line with our 2012 real GDP growth forecast of 1.8%. The July industrial production reading recorded the most moderate contraction since March, at 2.9% y-o-y. We believe, however, this will resurge somewhat in H212. This has informed our belief that vehicle production will pick up in the remainder of the year.

Further, BMI sees little to suggest substantial further appreciation for the Brazilian real in the short term. Rather, we believe central bank intervention, both through monetary easing, as well as directly purchasing US dollars, will mute any upside potential for the currency. An appreciation of the currency would provide further downside risk to our forecast, as this would make exports less competitive.

Over the longer term, we maintain our bullish outlook for the autos production sector, predicated on government policy bearing fruits, our view of resurging domestic sales, and the potential for Brazil to become a regional production hub. On the back of this bullish outlook, over the short and long term, we expect to see significant investment from international automotive manufacturers in the Brazil autos sector.

Chapter - Executive Summary

Chapter - SWOT Analysis

Brazil Autos Industry SWOT

Brazil Political SWOT

Brazil Economic SWOT

Brazil Business Environment SWOT

Chapter - Global Overview

UK Boosts Europe, But Favourites Still Outperform

Table: Passenger Car Sales M

Incentive Boom For Japan, US Powers On

Chapter - Regional Overview

Bullish On Mexico

Comparative Weakness In The Productive Capacity Of Mexico's Regional Competitors

The Continued Recovery Of The US Vehicle Market

Positive Developments In The Domestic Supply Chain

A Number Of Trade Agreements And Quotas Exist Amongst Mexico's Large Neighbours

The Strength Of The Peso May Dampen Export Growth

Chapter - Industry Risk/Reward Ratings

Table: BMI Risk/Reward Ratings For Autos Industry In Americas

Chapter - Macroeconomic Forecast

Table: Brazil – Economic Activity

Chapter - Industry Forecast Scenario

Sales

Table: Brazil Autos Sales By Segment – Historical Data And Forecasts, –

Production

Table: Brazil Autos Production By Segment – Historical Data And Forecasts

Trade

Table: Brazil Autos Trade – Historical Data And Forecasts

Economic Contribution

Table: Brazil Autos Economic Contribution

Industry News

Chapter - Passenger Cars

Table: Brazil Passenger Car Segment – Historical Data And Forecasts, –

Key Players

Table: Passenger Car Sales by brand

Company News

Growth In Alternative Fuels

Chapter - Commercial Vehicles

Table: Brazil Commercial Vehicle Segment – Historical Data And Forecasts

Table: Brazil – Light Commercial Vehicle Sales

Table: Brazil – Truck Sales by Brand

New Investments

Alternative Fuel Segment

Chapter - Motorcycles

Table: Brazil Commercial Vehicle Segment – Historical Data And Forecasts

Table: Brazil – Motorcycles Sales by Brand

Segment Developments

Chapter - Suppliers

Table: Brazil Automotive Parts Segment – Leading Names

Segment Developments

Chapter - Company Monitor

Chapter - Company Profiles

Fiat

Volkswagen (VW)

Chapter - Demographic Outlook

Table: Brazil's Population By Age Group, - (')

Table: Brazil's Population By Age Group, - (% of total)

Table: Brazil's Key Population Ratios, -

Table: Brazil's Rural And Urban Population, -

Chapter - BMI Methodology

How We Generate Our Industry Forecasts

Sources

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