The difficult 2016 was the Brazil vehicle market’s fourth downturn year in a row. With hindsight, it is easy to conclude there was excess optimism, exaggerated interventionism and poor assessment of the future. The Inovar-Auto programmes back in 2012 forecast sales of 4.5m light and heavy units by 2016/2017 – the tally last year was 2.05m, down over 20% on 2015.
That programme miscalculated the effect of fiscal stimuli though the goals of improving automobile fuel efficiency and encouraging investment in local research centres was on track. It seems that, by the end of 2017, better energy efficiency will be mandated as it duly should.
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Safety items will also attract regulator attention. These demand broader deadlines for implementation. New rules for semi-autonomous driving, collision monitoring and automatic braking would be welcomed more by the auto industry than an updated ‘Inovar-Auto II’ (a name likely to be changed).
As 2016 did not develop as expected, everyone involved in the auto industry was trying to work out when rock bottom would be reached. Last January, Anfavea economists previewed production and exports to rise 0.5% and 8.1% respectively in 2016, both meaning a boost to conserving jobs. Sales, they said, would shrink a modest 7%, a relief when considering 2015’s 26.6% plunge over 2014.
The year went on and the manufacturers association announced a new forecast last May: now production down 5.5%, exports up 21.5% and sales off 19%.
The full year results have just been revealed. Despite encouraging sales in December (top month in 2016), it was a really disappointing year.
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By GlobalDataProduction reached 2.157m units (down 11.2%); exports reached 520,000 units (+25% in volume; +1,6% in US$); domestic sales were down 20.2% to 2.050m.
With global statistics yet to be completed, Brazil should rank 10th in production, seventh in domestic market size and 10th or 11th in exports.
This crisis in the auto industry – the third severe one in 60 years – has left sour lessons. There are always risks even in such a promising market like Brazil’s. High profitable times alternate with those of losses.
Difficulties have led, for example, to less work together with lower wages in a lesser proportion. The difference is made up by government and company funds called Employment Insurance.
Although the economy has faced a second, consecutive GDP fall (2015 and 2016) – something unheard of in Brazil since the 1930 world depression – the year ended with some positive notes. Inflation, that peaked at almost 11% in 2015, lowered significantly to 6.3%, slightly below the 6.5% official top limit.
The 4.5% goal eyed for 2017 is expected by the main economic analysts. This would make room for the basic tax rate fall to 10% (or a bit less) by next year’s end and a probable confidence index increase. Tax rates for financing may drop. So more consumers would be keen to shop for a new car rather than spend money on maintenance and repairs.
For this year Anfavea, considering political instability more than economic facts, has made conservative predictions in black ink: 11.9% hike in production, 7.2% for exports, and 4% for domestic sales – 2.47m, 558,000, and 2.13m, respectively.
