The
first car in Brazil was a Peugeot Type 15 imported from France in 1897. After
that Peugeot, other French brands like De Dion Bouton, Renault, Darracq, Decauville
and Bayard-Clément started to come to the biggest country in South America, writes
Rogério Louro Alves.

But if the main car makes at the start of Brazilian motoring were French, the
First World War soon altered the course of the country’s automotive history.
Importing of European models stopped and the American brands Ford, Chevrolet
and Cadillac dominated the market. After this, with the evolution of the market,
other European brands entered Brazil, but the French now enjoyed only a tiny
participation.

One hundred years later, Renault, Peugeot and Citroën decided to attack the
market with massive investment and are changing history again as they attempt
to return the country to the golden days of French brands in Brazil. Today all
three build vehicles locally, but the latest French Revolution actually started
at the beginning of the 1990s, when the government opened the country to imported
vehicles.

Citroën’s Picasso minivan is built in the same Brazilian factory as the Peugeot 206

Since the 1950s the government had increased taxes on foreign-made cars to
greatly reduce imports and force car makers to manufacture in Brazil. This plan
reached its pinnacle in 1970s when vehicle imports were prohibited altogether.
Only in 1990 were imports again permitted – with lowered taxes.

Citroën was the first French car maker to return to Brazil in 1991, followed
by Renault and Peugeot a year later. The rise of the sales graph was near-vertical
and Renault and Peugeot ended 1994 with first and second place in the ranking
of import brands (i.e. those without local plants). Citroën was in eighth place
at a time when there were 30 brands. Up till now, the French companies have
continued to enjoy great growth.

“Brazil is a big market with great potential and the French brands knew this.
We invested aggressively, while the Japanese though a lot before making decisions”,
said Renault do Brasil marketing director Antonio Megale.

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“The French car makers have shown that we are ‘general’ brands and we offered
complete model ranges in Brazil. Other importers invested only in little segments”,
added Cees Hermanns, who was president of Peugeot do Brasil from 1996 until
last month (he’s now president of Peugeot Belgium).

After a decline in imported car sales in 1996, due to a government decision
to increase taxes, the three French local manufacturers saw their performance
soar. Between 1997 and 2000, Renault registered a sales growth of 498.3%, Citroën
a rise of 300.8% and Peugeot 241.4%. To achieve these results, the French companies
sought the help of factories in other Mercosur countries.

“With models made in the Mercosur countries exempt from import tax we had competitive
prices to boost sales”, explained Guillaume Couzy, Peugeot do Brasil marketing
director. Renault and the PSA Group have manufacturing plants in Argentina and
CKD assembly lines in Uruguay.

Brazil’s Peugeot 206 uses a locally-made one-litre Renault engine

Nowadays, the three car makers all produce vehicles in Brazil and continue
to invest to increase sales. This year the three companies are putting in about
$US60 million to advertising and publicity alone compared with $US35 million
last year. And, in the first half of the year, all three French firms recorded
a sales rise over the first half of 2000 – Renault increased volume 61.3%, Citroën
46.8% and Peugeot 23.4%.

Renault’s great rise reflects the car maker’s aggressive efforts to build a
solid structure in Brazil – it was the first of the three French brands to open
a plant. Renault invested $US1 billion on a capacity of 200,000 vehicles per
year and the São José dos Pinhais factory, in Paraná state, started Scénic minivan
production at the beginning of 1999. The lines now also carry the Clio hatchback
and sedan and, next year, the factory will add the new Mégane.

Last year, Renault invested $US220 million in an engine plant in front of the
car factory with a capacity of 400,000 one- and 1.6-litre 16-valve petrol units
a year. The one-litre 16-valve engine goes into various locally-built Renault
cars and, in a display of Gallic-Latin American pragmatism, also powers the
Brazilian Peugeot 206.

At the end of this year, Renault will open a commercial vehicle and light pick-up
truck plant, again in São José dos Pinhais. The new plant is a $US100 million
investiment to produce the Renault Master van and – reflecting who controls
the Japanese firm these days – the Nissan Frontier pick-up. The new plant can
build 50,000 vehicles a year.

With this structure, Renault expects to sell 105,000 vehicles in Brazil in
2001, a rise of 85.4% over last year’s 56,608.

“We want to be the fourth largest car maker in Brazil in 2005, with 10% of
the market and about 200,000 vehicles sold”, said Luc-Alexandre Menard, Renault
do Brasil president. Right now, Renault is fifth, just ahead of Ford, and in
the first half of the year took 4.5% of the market.

Renault Scenic production began in 1999

Citroën and Peugeot started to sell Brazilian-made models only this year, so
don’t expect a great sales increase until the second half results are in. Citroën
began offering the Picasso minivan in April and Peugeot the one-litre 206 at
the end of June. The two brands are both made in the PSA Group plant in Porto
Real, Rio de Janeiro state. The French group invested $US600 million to build
the factory which can produce 100,000 vehicles per year. “This capacity can
quickly be doubled if we need it”, said PSA Group president Jean-Martin Folz.

PSA Group, too, is building an engine plant, also in Porto Real, to be opened
next February with capacity of 50,000 1.6-litre 16-valve motors a year. Investment:
$US 50 million.

Production of the Peugeot Boxer van is also starting this month at the Fiat/Iveco
plant in Sete Lagoas, Minas Gerais state. Fiat’s involvement reflects the Sevel
Sud and Nord van plants’ co-operation in France and Italy which share basic
models around the Fiat, Lancia, Citroen and Peugeot brands. This year the Fiat/Iveco
plant will produce 1,000 Boxers and next year will build 2,000 on the same assembly
line that churns out Fiat Ducato and Iveco Daily vans.

With Brazilian-made models in the line-up, Peugeot and Citroën also expect
to increase sales. This year, Citroën plans to sell 17,000 vehicles, a rise
of 87% over the 9,103 units sold in 2000, and, by 2005, the car maker is aiming
for 60,000 a year. To reach that target, Citroën plans to produce a second model
in Brazil. “We will need a Brazilian-made compact car to reach our objectives
and in 2003 we will produce it in our Porto Real plant”, confirms Citroën do
Brasil president Sérgio Habib.

Peugeot expects to sell 38,000 vehicles this year, an increase of 77% on the
21,518 units shifted in 2000. This PSA Group company is aiming for 100,000 units
a year by 2005. “We want to be the fifth automaker in 2005”, said the company’s
Couzy.

Renault’s Clio sedan is built alongside hatchback versions

The evolution of the French car makers in Brazil shows that this unusual market
(a special low rate of tax saw one-litre ‘popular cars’ take 70% of sales in
2000) is changing from being the traditional home of the four ‘old’ local car
makers – Ford, GM, Volkswagen and Fiat.

“In future years no car maker will have more than 20% market share”, said Peugeot’s
Hermanns. Currently, Volkswagen has 27%, Fiat 26% and General Motors 22%. Ford
has 8.5%.

Back in the 1950s, when car makers first started to build factories in Brazil,
Simca was the first French company to invest locally. The company built a plant
in São Bernardo do Campo, São Paulo state, in 1958. In 1959 the company launched
the Vedette-based Simca Chambord.

In 1959, Willys Overland do Brasil (created in 1952) started producing the
rear-engined Renault Dauphine under licence. At the start of the 1960s, Willys
also produced the Alpine-based Interlagos sport model and Simca launched Chambord
station wagon named Jangada.

In the 1960s, Peugeot evaluated the possibility of car sales in Brazil and
negotiated with the Brazilian government over building a factory.

But nothing proceeded. At the end of the 1960s the first French invasion of
the Brazilian car market ended. In 1967, Chrysler do Brasil bought Simca do
Brasil which was in financial difficulties and Ford bought Willys Overland and
stopped Renault production.

During the 1970s, at the same time as Fiat entered Brazil, Renault negotiated
with the government over constructing a plant but subsequently abandoned the
plan. Only in the 1990s did the French car makers come back to see, and perhaps
in time, conquer the car market.

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