The federal government of Brazil has again postponed restoring the full rate of IPI tax on cars by 1 July. Having kept the secret well, it announced the current two-thirds discount will be maintained until the end of the year.
The news echoed around the IV Auto Industry Forum in São Paulo, organised by Automotive Business Promotions.
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Speculation the current IPI level would be maintained indefinitely was heard. Here in Brazil, cars are taxed more heavily than in most world markets due to a complex tax on tax chain.
The tax relief turnaround was not enough to alter significantly industry expectation which a predicts 2013 sales and production increase of up to 4.5% over 2012.
The ambitious Inovar-Auto (Auto Innovation) regime was the forum’s main focus and there are still several question marks over technology advances, industrial processes and efficiency guidelines within a five-year timeframe.
The autoparts segment has expressed deep concerns over local content rules, which the federal government postponed – again – for two months. The rules call for a strict traceability scheme beginning in the countries from which the parts originate and there are uncertainties about such control in Argentina.
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By GlobalDataThe possibility of creating the Inovar-Peças (Parts Innovation) program parallel to Inovar-Auto was discussed, thus adding new levels of complexity and possibly derailing both in the process.
Roland Berger consultancy’s Stephan Keese said in his speech the view abroad that the Brazilian market is of a new ‘gold rush’ for auto companies in Brazil. Yet there remain questions over the effect on financial results and the risk of future excess capacity.
A Ford spokesman recently admitted in Detroit an estimated loss of US$300m in South America in Q1 (Brazil accounts for 60% of regional sales). GM lost money on the continent last year, too. But these may be isolated cases.
With, a 5m-6m unit market predicted by the end of the decade, market share in Brazil will be even more hotly contested.
Seven new automakers of light vehicles should be well settled in Brazil by 2015, taking the count to 25. And that’s not all: Audi, Mercedes-Benz, Land Rover and Kia are still eyeing the territory.
The number of engine manufacturers will rise from 13 to 18, including Fiat’s new factory in Pernambuco state, and Chery, which announced its decision during the forum. Hyundai’s new Brazilian subsidiary is expectd to announce engine production soon.
