A November survey of 95 key players in the Brazil auto supply industry showed that 46% would trim planned investments for 2009, Paulo Butori, president of the national group of autoparts companies, Sindipeças, said.
The other 48% would stick to their original plans while only 6% said investments would increase.
“You must remember this survey was amidst the scenario of the moment. Some decisions have been changing daily and the situation is likely to worsen. All surveyed companies now plan compulsory holidays for at least 16 days in December,” Butori noted.
All this is despite the fact that 2008 will see the best sales ever for the Brazilian auto industry – 14% growth to 2.82m units – and record production as well.
Last month, it went almost unnoticed that accumulated production (exports included) had passed the 3m mark for the first time and would reach 3.24m by the end of the year.
But the daily sales average in November, with three fewer selling days than October, dropped 14%.
The key worry is the excessive number of vehicles in inventory, both at plants and dealers, waiting for buyers.
Inventory had jumped from 25 to 30 days’ supply to 56 days by the end of November.
“It is necessary to keep very cool and focused and not rush decisions,” Butori said, adding that suppliers cannot also just ignore events.
One development giving hope to the supplier sector is the publication of the Brazilian Autoparts Manufacturers Official Guide 2009, a partnership between Sindipeças and the Brazilian government agency that promotes exports and investments.
It will be updated every two years and distributed to over 100 countries on five continents in English, Spanish and Portuguese in both paper and electronic forms.
Over the weekend, all automakers immediately slashed prices after the federal government announced a fiscal stimulus package.
Excise tax was cut by 50% (zero for cars up to 1,000 cc/61cu in displacement), valid from now to the end of March 2009. The same reduction applies to the financial operations tax that affects financing.
Income tax rates were also reduced.
The government was prompted to act after dealer groups predicted a sales slump of up to 19% next year if taxes were left unchanged.