EXCLUSIVE: BRAZIL: Auto executives remain upbeat
Key Brazilian auto industry executives turned out in force for the Autodata Perspectives 2008 seminar in São Paulo, renewing their bets on this year's outstanding results and strong growth in 2008.
Current numbers continue to astonish. Daily production in late October -13,600 units- ran at an annualised pace of 3.4m units, practically matching the country's entire 3.5m-unit installed capacity!
Domestic sales are over 11,000 units daily, which would mean 2.8m yearly if sustained during the next 12 months.
Should this occur, Brazil would rank as the fifth or sixth largest world market by 2008, jumping three or four places compared to 2006.
The forecast for next year varied according to individual executives' level of caution during the two-day seminar.
Estimates for domestic sales ranged from up 8% (pessimistic) to 20% (optimistic) with GM and Fiat holding the two extreme positions.
Ray Young, who has just handed the presidency of GM of Brazil/Mercosur to Colombian Jaime Ardila, was concerned with the much-extended, up-to-84 months finance terms on offer.
"There is a possibility of repeating in Brazil, in the auto sector, the crisis that has [hit] the American [sub-prime] housing credit market", said Young, who is now GM group vice president, finance, in Detroit.
He reckons Brazilian auto financiers could face a spate of payment defaults in three or four years.
On the seminar's sidelines, however, this vision was seen as excessively frightening. The total amount of credit in Brazil is almost irrelevant - less than 30% of gross national product (GNP) - compared to about double that in the US. The level of household debt here is incomparably less.
Overdue payments in auto financing are quite low -half the general average— and keep falling. Besides, the short and medium term scenario includes a steady interest rate slump though cash purchases are, for the first time in many years, less than 30% of the total.
Another positive point stressed was the importance of new model launches to pump the market up. On top of 2007 having been one of the best in this aspect - the Renault Sandero and the new Ford Ka will arrive before the year ends - 2008 is also a promising year.
The two makes that account for half of sales - Fiat and Volkswagen - have important novelties in the pipeline. Fiat will complete the redesigned Palio lineup with a new Weekend estate and Strada pick-up, plus the Linea sedan, while Volkswagen is redesigning and increasing the top-selling Gol range.
More than 10 redesigned and attractive products (the locally-built Honda Fit and Toyota Corolla, for example) plus new imports are on the way as well.
An interesting trend: buyer preference for one-litre models ('popular cars') fell to 50% in October vs 75% five years ago).
It remains uncertain if the local components industry will have enough breath to keep up with the automaking play in coming years. Until now, imported components have helped, but at the cost of 'zeroing' the positive trade balance with foreign markets.
A deliberate slowing down of exports of CKD kits and built-up units (largely in the face of unfavourable currency exchange rates -ed) plus import growth was how automakers coped this year with increasing demand that peaked at 29% in October.