There’s always a silver lining somewhere. In a year so far marked by a deep fall in domestic sales, predicted to reach 27%, the Brazilian real’s devaluation of some 40% has boosted sales abroad.
From January to October this year exports of CBU (fully assembled) vehicles are up 17% year on year to 333,000 units.
Exports by values (CKD kits for assembly overseas included), however, were almost level in the first 10 months of the current year, across automobiles and light and heavy commercials. A slight dip of 1.5% to US$7.362bn, in fact. This was due to the exchange adjustment itself, an unfavourable mix of exported products (fewer high value trucks) and the fact that our internal and logistics costs are still too high.
Trade lobby group Anfavea is expecting more exports at higher values but has not made any projections publicly. Recovery will take time – 10 years ago Brazil exported almost 1m units combining finished cars and kits.
Brazil has just signed a trade accord with Colombia, South America’s fourth largest market (350,000 units yearly) after five years negotiation. The initial export quota with zero tariff is low, 12,000 units/year, but it might rise to 50,000/year as of 2018.
BMW initially planned no exports from its new Brazilian assembly plant before 2020. Yet now the company is considering making better use of its production capacity of 32,000 cars per year and the friendly exchange is an encourager.
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Another positive factor for BMW is its model line-up flexibility: The 1- and 3-series lines, X1, X3 and Mini Countryman. The ideal markets would not be nearby countries, because local content is still low to meet rules for trade with Mexico and Mercosul. But other continents could be targeted, depending on specific demands.
FCA foresees the Jeep Renegade being competitive for exports to Latin America. The plant is set to ramp up production but has not determined the countries to export to. Argentina is facing a foreign currency crisis and is severely taxing vehicles with higher added values like the Renegade diesel. Mexico would be a more feasible alternative in the short run if prices were more inviting than same models from Italy.