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August 28, 2015

BRAZIL: Sales recovery will take time

Predictions on when new vehicle sales in Brazil might vary. A GDP decline of a shade over 2% is now estimated for this year to be followed by 0.5% to 1% in 2016.

Predictions on when new vehicle sales in Brazil might vary. A GDP decline of a shade over 2% is now estimated for this year to be followed by 0.5% to 1% in 2016. If this happens as forecast (the local auto industry is particularly sensitive to this economic indicator), we would experience an economic phenomenon for the first time since 1930 and 1931 (following the 1929 New York stock exchange crash). Not since then has Brazil faced two consecutive years of recession.

According to Volkswagen of Brazil CEO David Powels, the Brazilian economy needs to grow from 4% to 6% for light vehicle sales to match the record results posted in 2012. He estimated this level – about 4m light and heavy units – would again be achieved within five years.

“Industry must be prepared to live with this”, he added.

Workers at VW's Taubaté plant, 135 km (85 miles) east of São Paulo City have gone on strike after 50 workers were sacked last week but the walk-out was called off after VW reversed its decision. Nonetheless, 500 employees are currently idle there, according to VW.

Industry lobby group Anfavea predicts a slow recovery but only in the second quarter of 2016 at best.

The PwC consultancy’s Marcelo Cioffi is betting on a minimum of four years before the market reaches the 2012 level again.

Among the factors hurting the sector are cost rises. Passing these on in the form of higher new vehicle prices is is inevitable despite the current subdued demand, argues Rodrigo Baggi from the Tendências consultancy.

This is a sales-depressing factor of course – prices on the rise, sales falling.

BRAZIL: GM strike ends as Mercedes truck workers walk

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