All indices improved in March here in Brazil, especially those of vehicle production, compared with February, because there were three more working days last month.

Even so, they were not enough for the first quarter to approach the good results of the same period last year, when there were still few local effects of the global semiconductor crisis.

This supply bottleneck in the auto industry has worsened more than expected due to the Russia-Ukraine war this year.

Brazil was no exception and both light and heavy vehicle manufacturers were affected last quarter.

That said, auto industry production of 184,800 units March 11.4% higher than in February but 7.8% lower than in March 2021.

The quarterly year on year drop was 17%.

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By GlobalData

Light vehicle assembly lines were halted in March but the sharp drop in heavy vehicle production was a surprise.

In 2021, truck production rose 74.6% compared to 2020 but grew only 3% in the first quarter of 2022.

Some heavy vehicle manufacturers suspended production last March for more than a week, also reporting the lack of tyres and other components as well as microprocessors.

Exports of 38,900 units declined 6.2% in March compared to February. However, for the quarter, volume rose 12.8% to 108,100 units.

Domestic market sales rose 10.9% month on month in March but fell 22.5% year on year.

First quarter sales fell 23.2%.

Manufacturers’ association Anfavea maintained its growth forecast for 2022: 8.5% in sales, 3.6% in exports and 9.4% in production.

The shortage of semiconductor chips, however, is now likely to last longer than previously predicted and forecasts may yet be revised.

There have been some positives in 2022.

For the first time in 40 years, the federal government made a slight reduction, at the beginning of March, of the IPI (Industrialised Products Tax, light vehicles’ main tax) permanently.

Previously, there had been temporary reductions that stimulated sales. But volume soon slowed when the tax rose again.

There was a chance there would be another small IPI reduction this month but this is still to be confirmed.

The government also launched its first fleet renewal programme.

This will start with trucks over 30 years old (yes, they are still on the roads in Brazil). They must arrive under their own power at the collection centres, however.

This pilot programme focuses on exchanging older trucks for younger models, not necessarily new.

Light vehicles are also likely to be eligible soon, starting with ancient taxis.