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September 10, 2009

BRAZIL: Production must climb to 5m a year

Vehicle production in Brazil needs to rise to 5m a year to get the economies of scale allowing launch of leading technologies and platforms.

Vehicle production in Brazil needs to rise to 5m a year to get the economies of scale allowing launch of leading technologies and platforms.

Speaking at a trends and innovation seminar in São Paulo organized by SAE Brazil, Global Insight’s Guido Vildozo called for the use of more high-density production platforms in South America. The region uses only 5% of global platforms underpinning at least 1m units a year and this is unlikely to change until 2015.

Vildozo is betting on the flexibility of building different body styles on the same platform, including different brands’ vehicles and expects to see Brazil included in global consolidation.

Two traditional brand executives highlighted the competitiveness of Brazilian auto products abroad.

This year, that number of exports is likely to match that of imports, according to most pessimistic forecasts. Exports include trucks, buses and agricultural machinery of high added value and Brazil does not import any such vehicles.

Fiat Brazil CEO Cledorvino Belini called for a long term industrial policy to strengthen the auto sector and to encourage exports.

He was sceptical about Chinese companies setting up assembly operations here saying he heard such reports regularly.

“I want to see factories with series, high-scale production platforms and investments. If there is world excess capacity and it is easy to sell in one of the few expanding markets like ours, why invest if it is made easier to pour products in here?”

Over two thirds of Brazilian auto imports come from Argentina and they contain a high content of components exported from here.

Brazil ceases importing diesel around 2012 but Belini was unfazed, calling instead for more work on ‘second-generation’ ethanol due to its “even greater degree of sustainability”.

Ford of Brazil CEO Marcos de Oliveira said certain advances would barely be applicable here.

“Hybrid vehicles combine electric and combustion engines, are easier on fuel, but are very expensive. They would be market niches at most”.

Brazilian vehicle output should just exceed 3m. As for that 5m mark, estimates vary from five to 10 years.

Fernando Calmon

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