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Brazil Autos Report Q1 2012
Business Monitor International, Nov 2011, Pages: 64
Business Monitor International's Brazil Autos Report provides industry professionals and strategists, corporate analysts, auto associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Brazil's automotive industry.
An imminent slowdown in Brazilian vehicle demand and a potential loss in exports due to the strengthening of the real are beginning to weigh on carmakers’ minds. Total production grew a modest 3.3% year-on-year (y-o-y) to 2.60mn units in the first nine months of 2011, according to estimates from the Brazilian autos association Anfavea.
Large-scale investment continues to pour into local manufacturing, further raising BMI’s long-standing concern about overcapacity problems. In October 2011, the Renault-Nissan Alliance became the latest carmaker to announce an investment in Brazil. Its investment is part of its broader strategy to increase its presence in the BRIC (Brazil, Russia, India and China) markets and totalled BRL3.1bn (US$1.7bn). China's Jianghuai Automobile (JAC) has earmarked BRL900mn (US$506.7mn) for investment, with the purpose of tapping growing demand for Chinese cars in the country.
The attraction for carmakers is the potential for the Brazil to become the world's third largest autos market between 2011 and 2016, by the end of which period BMI expect new vehicle sales to reach 5.65mn units a year.
In view of the investments made so far, BMI forecast an average 6.4% y-o-y growth in production between 2012 and 2016. There is downside risk to this forecast, as appreciation of the real and a consequent loss of competitiveness could result in slowing demand for Brazil’s autos exports. There could be upside risks as well, as the government looks keen on curbing imports and bolstering domestic production.
A combination of slowing domestic demand and loss of competitiveness in domestic production has led to a fall in Brazil’s score in BMI’s Risk-Reward Ratings for the autos industry in Americas this quarter, although the country has managed to retain its position as third in the rankings.
Another prominent trend has been that of local companies going international. In September 2011, Brazil’s Systemic Commercial Vehicles revealed it is looking to export more Brazilian-built vehicles to Nigeria, as it recognises similarities in infrastructure and road conditions in the two countries which would make the vehicles suitable. Systemic has already started similar drives in Angola, Ghana and South Africa, creating partnerships between Brazilian producers and local distributors. Meanwhile, Brazil-based parts supplier Iochpe-Maxion has concluded acquisitions of Mexican firm Grupo Galaz and US-based Hayes Lemmerz International in October, in two separate deals. BMI believe both acquisitions are aimed primarily at helping Iochpe-Maxion expand the size of its business while remaining focused on its core business.
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