Independent of obligations imposed by the industrial policy, all automakers building cars in Brazil (or about to) intend to increase their local content percentage. This is due to spiralling logistic costs, direct and indirect tax rises on imports and, especially, because there is a clear tendency towards a dollar to real valuation in this and in the years to come.
Since 2012 vehicles from abroad (including Argentina and Mexico) have been steadily losing market share, down to 17.6% last year from 23.6% in 2012. For 2015, Anfavea is estimating zero growth in new vehicle registrations compared to 2014. Exports are to increase just 1% but total production (which accounts for direct industrial jobs) would rise by 4% due to imports being replaced by vehicles made locally.
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Anfavea’s economic studies department has predicted one of the most dramatic dollar exchange rates by year end: BRL3.10. Since the dollar is trading at BRL2.57 today (falling rapidly), this is nothing short of a midi-devaluation.
Despite rates not reaching that level so far, Chery admitted by the end of 2014 it would ramp up its local parts manufacturing programme and speed up its previously planned supplier base around its recently-inaugurated manufacturing plant in Jacareí, in the Greater São Paulo area. An engine plant will be also built there.
Production of the Celer compact saloon started a month ago with 45% local content, to reach 80% by 2019. The subcompact QQ, to start production in the second half this year, might reach 85% since it is a lower cost model.
JAC is another Chinese company looking for more local parts and components supply.
In separate recent statements, General Motors and Nissan CEOs have confirmed that local content of products made here is to increase. GM has not set a deadline but Nissan is expected to reach 60% local content with their new one-litre I3 engine in production this month and 80% in two years.
According to Automotive Business, the automotive sector is the country’s biggest importer. Last year imports amounted to $20bn for light and heavy vehicles, auto parts, engines and tyres. CBU and CKD vehicles and spare parts shipping by Anfavea-affiliated automakers, together with those of companies under the auto parts producers’ union umbrella Sindipeças, totalled $19.5bn, nearly an even trade balance.
