The Brazilian car market could exceed 1.9m units this year, pushing production to record levels, despite a fall in exports.
Go deeper with GlobalData
Discover B2B Marketing That Performs
Combine business intelligence and editorial excellence to reach engaged professionals across 36 leading media platforms.
Domestic vehicles sales in October were up 27.3% to 175,300 units, forcing the Brazilian trade association to revise its forecast for the full year upwards from 1.84m units to 1.9m units, reported AutoData.
The strong growth in October was attributed to the increased availability of credit at low interest rates and over longer periods. Payment periods can today reach up to 72 months. The low interest rates are the result of drop in Brazil’s basic interest rate, known as the Selic.
According to auto industry association Anfavea, the interest rate for vehicle financing was 1.77% in October, down from 1.94% a year ago. Furthermore, payment terms in excess of 36 months accounted for 40% of sales, up from 30% at the beginning of this year.
Vehicle production reached a record monthly high in October. At 226,400 units production was up 14.2% on a year ago. Year-to-date production was 4.5% to 2.2m units. For the full year Anfavea has forecast production of 2.54m units.
Because of the strong Brazilian currency, the real, exports have fallen. In the first 10 months of 2006 volume was 533,900 units, down from 601,300 a year earlier. The domestic market has therefore more than made up for the shortfall.
Part of the reason exports have not fallen as much as expected is the recovery of the Argentine vehicle market, Brazil’s largest export customer. Argentine sales totalled 381,000 units in the first 10 months of the year, up 13% year on year.
Fiat is currently market leader in Brazil with sales of 372,900 cars in the first 10 months. Second place is being closely contented by both General Motors and Volkswagen. GM sold 325,600 cars, whereas Volkswagen sold 324,000. All are recording sales increases in line with the market.
The strong market performance has resulted in several manufacturers announcing investments in Brazil. Renault do Brasil will invest $US360m between 2006-2009 to produce the new Renault Megane, the Logan, and a new model that will be launched in 2009. Toyota is investing around US$42m in its plant in Sao Bernardo do Campo (Sao Paulo) to expand the plant to produce components for export.
Finally, Volkswagen has announced an investment of 2.5bn reals ($1.16bn) between 2007 and 2011 to develop new products and increase component production.
Brazil industry expects a good year
