The announcement of another automaker landing in Brazil – this time China’s JAC – shows the strength of the Brazilian market. After all, a market in which sales more than doubled in just five years (up from 1.5m units in 2004 to 3.1m in 2009; 3.7m forecast for 2011) can only be regarded as highly attractive.
In the last six months, at least 14 projects have been announced, some confirmed as going ahead, others under study in different stages.
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This includes both automakers new to Brazil and planned capacity increases at Ford, GM, Mitsubishi and Volkswagen. Not to mention the new Hyundai and Toyota plants under construction, and lorries.
The Chinese alone account for three: besides JAC and Chery, Lifan will establish a small assembly operation similar to Suzuki’s. Fiat and Nissan have announced heavy investments in other locations. Renault and PSA Peugeot Citroën are also look for more opportunity.
Brazilian group EBX is considering joining the market.
BMW will officially announce their assembly plant only when location, car model and investment are determined, news is expected in November.
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By GlobalDataA positive decision has been already taken in Germany, according to a just-auto source, despite denials here in Brazil.
By the end of 2014, Brazil should see sales of 4.5m vehicles a yearly and 6m by the end of the decade.
If the country’s production costs, in US dollars, are, according to a PWC study, 60% higher than China’s and 33% over Mexico’s, how can this attractiveness be explained?
Firstly, the Brazilian real exchange rate cannot remain forever at the current level. And the country will do something about its high costs.
A look at the new government-sponsored industrial competitiveness plan, with removal of tax burdens and the setting of a special regimen for the automotive sector, yet to be detailed, shows that.
Sérgio Habib, SHC group president, importer and JAC’s major shareholder in the future Brazilian plant, said: “Ocean freight, port taxes and import duties severely hit those like us who will sell 100,000 cars yearly from 2013. That is an unviable volume to import from China.”
The $600m investment, in a location yet to be determined, includes facilities to assemble 100,000 units yearly (two shifts), a tech centre and proving grounds. Local content of 60% minimum will enable tax-free exports under Mercosur and Mexico free trade accords. No engine production is planned.
It’s a true Sino-Brazilian project. Since it will start from scratch yet is based on the J3’s architecture, it will take into account local buyer preferences yet be quickly adaptable to Chinese market demands.
It will also have cheaper versions, keeping it in the R$30,000 (US$18,750) to R$40,000 (US$25,000) range at current prices. It will spawn a vehicle family that includes a hatchback, sedan and, very likely, a sport utility.
