Last month was best February for Brazilian auto sales ever, with 274,000 cars, light and heavy commercials shifted. Year on year growth topped 24%.
Yet one must note that last year’s Mardi Gras – the traditional, five-day holiday that literally brings the country to a halt – occurred in February, resulting in far less showroom traffic. This seasonal difference partly explains the growth curve.
Nonetheless, sales in the first two months of 2011 improved 19.5% over the same period of 2010 and well above auto trade group Anfavea’s 5% prediction for the year.
A levelling-off of sales is, however, expected for this Mardi Gras month, the country-wide party having ended on 9 March. The comparative basis with March 2010, when last year’s fiscal incentives ceased, will be of interest.
So far this year, the credit restriction imposed by the Central Bank has not affected new and used car sales. Dealers and banks have found creative ways to dilute down payments for financing so as to offer lower interest rates.
Nonetheless, for the second month in a row, the market share of so called ‘popular’ cars, ie those entry level models with engines up to 1 litre (61 cubic inches), continued falling. In February it was 45.8%, some six percentage points below last years’ average.
Dealers say one reason is an interest rate rise for 60-month term finance, which hit the entry level segment harder, damaging sales.
But there are those who attribute this to ‘market evolution’. Consumers have higher buying power and consider the price difference insufficient to justify the one litre models’ inferior performance and disproportionally lower fuel economy.
Other Brazilian buyers increasingly are buying imports, the vast majority of which are powered by over-one-litre engines.
In the coming months this trend will be closely monitored by all automakers and importers. After all, profit margins for a low-priced ‘popular’ are extremely narrow.
If this continues throughout the year, carmakers’ profits could be positively affected. On the other hand, the current highly competitive Brazilian auto market could just as easily put the squeeze on margins. We’ll see.