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November 7, 2006

EXCLUSIVE: BRAZIL: Auto industry sees another good year ahead

With 2006 turning out to be a truly excellent year for the Brazilian auto industry, questions are already being asked about 2007.

With 2006 turning out to be a truly excellent year for the Brazilian auto industry, questions are already being asked about 2007.

One of this year’s key boosts – it’s the second in a row with double-digit, home market growth – was the numerous launches of new models. Total production and exports by value will set new records.

The Honda Civic, Renault Mégane saloon and estate, VW SpaceFox, Chevrolet Prisma and Celta, VW Polo and Peugeot 307, both hatchback and saloon, were the highlights of models variously redesigned completely or updated.

These helped to heat up the market, along with other factors like consumer confidence, lower interest rates and more readily available long-term financing, as well as a catch-up of the sluggish demand that bottomed in 2001.

For 2007, the pace of new model launches will increase. There will be new model unveilings in all segments, from the new Ford compact (old Fiesta platform), Renault Logan, Citroën C4 sedan and hatchback and Fiat Grande Punto, and updates for the Ford Fiesta and EcoSport, VW Golf, Fiat Palio, Honda Fit and Chevy Astra II hatchback.

An all-new medium-size pickup has been just confirmed by VW – to arrive in late 2007 or 2008.

Next year will also be the year in which, under a free trade agreement, more tax-free Mexican-made models will become available. Following the Ford Fusion, which is selling extremely well, will come the Nissan Tiida and Sentra plus the VW Jetta sedan and wagon.

At least 30,000 units are expected, three times as many this year, for an average retail price range of at least three times the domestic compacts.

Local market forecasts were intensely discussed during the recent Autodata 2007 Perspectives conference in São Paulo City. The four big manufactures, once again, were divided.

The pessimistic outlook came from GM and Volkswagen who believe that depressed world economy growth (GNP) will be reflected here. More optimistic, Fiat and Ford think the current recovery from the 2001 doldrums will continue – in the order of 6% to 7%.

Booz Allen Hamiton’s Letícia Costa noted that GNP growth accounts for 60% of Brazil’s new car sales expansion at present. Paulo Cardamone, from CSM Worldwide, is a believer in 7% growth. He forecast that 1.4-litre engines will account for up to 35% of the compact fleet over the next five years and is also betting on solid market share increases for models with automated manual gearboxes.

Anfavea, the automakers association, will keep pressure on the government for an auto sector policy that reduces taxes on light vehicles.

It would also like current incentives to trade-in less fuel-efficient old cars for new models to be made permanent.

The industry expects total light and heavy vehicle domestic sales to pass the two million mark in 2007, for the first time since the record year of 1997.

Fernando Calmon

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