Brazil Automobile

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Executive Briefing:

Brazil Automotive Industry Analysis

Date: August 2010 RIS Research

Religare Technova IT Service Ltd, A-3/4/5, Plot No. 11, 7th Floor, GYS Heights, Sec-125, Noida



2 | P a g e © C o p y r i g h t : R I S R e s e a r c h

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1 Executive Summary

With a large consumer base, the automotive industry is one of the key growth drivers for the Brazilian

economy. The Brazilian automotive industry, in terms of the presence of global manufacturers andgrowth potential, leads its regional counterparts in Argentina and Mexico, and is projected to produce

close to 3.4 million automobiles in 2010. Most of the large global auto manufacturers are present in

Brazil, including the Volkswagen Group, Fiat, Ford, General Motors, Nissan, Toyota, MAN SE, Mitsubishi,

Mercedes-Benz, Renault. In addition, the industry landscape includes the emerging national companies

such as Troller, Marcopolo S.A., and Agrale.

The report entitled ‘Brazil Automotive – Industry Analysis’ provides a crisp and comprehensive analysis

of the Brazilian automotive sector. The research provides a detailed analysis of the Brazilian automotive

industry scenario including coverage of the recent developments in the industry. Further, the report

covers the various segments of the Brazilian automobile industry, analyzing each segment in terms of

production and sales volume and highlighting the underlying current and future trends.

The report also provides a brief overview of the key players in the industry highlighting their strengths

and weaknesses. It also analyses opportunities ahead for the players in the market and the areas which

can prove to be risky to step into. The report intends to be a ready reckoner for companies looking to

invest or venture into the Brazilian Automotive industry.

Key findings in the report include:

Supported by a number of factors like increasing purchasing power of the country’s middle

class, auto financing strategies adopted by leading banks, lower interest rates and increasing

demand from export markets like the US and Europe(post-recession), the Brazilian passenger

car production volumes are projected to reach 2.8 million units by 2010-end.

With the development of road connectivity in the urban as well as rural areas, expansion of

cities, up gradation of road infrastructure and increase in the demand from export markets, the

Brazilian bus production volume is projected to witness a y-o-y growth of over 36 per cent in

2010.

Flex-fuel technology presents a unique opportunity to auto manufacturers in the country, with

Brazil leading globally in the adoption and growth of hybrid vehicles.

The Southeast region in the country, including the two urban centers of Rio de Janeiro and Sao

Paulo, account for the majority of vehicle registrations, especially that of cars.

Up to US$20 billion is projected as investment in capacity expansion by auto manufacturers in the next

five years in Brazil, catering to the increasing demand in the domestic as well as nearby export markets





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2 Table of Contents

1. MARKET BRIEF

1.1 Market Overview

1.1.1 Current Scenario

1.1.2 Production and Sales Volume

1.1.3 Market Developments

1.1.4 Demand & Supply Pattern

1.1.5 Region-wise New Automobile Registration

1.2 Industry Trend

1.2.1 Increasing Middle Class Base

1.2.2 Rising Purchasing Power

1.2.3 Success of Flex-Fuel Vehicles (FFV)

1.2.4 Cost Effectiveness & Geographical Positioning

1.2.5 Passenger Cars Stock

1.2.6 Economic Slowdown

1.2.7 Automobile Insurance

1.2.8 Biofuel Industry

2. SEGMENT ANALYSIS

2.1 Passenger Cars

2.2 Light Commercial Vehicles (LCV)

2.3 Trucks

2.4 Buses

2.5 Motorcycles

2.6 Agricultural Machinery

3. REGULATORY ENVIRONMENT

4. COMPETITIVE LANDSCAPE

4.1 Fiat

4.1.1 SWOT Analysis

4.1.2 Business Strategy

4.2 Agrale

4.2.1 SWOT Analysis





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4.3 Ford

4.3.1 SWOT Analysis


4.4 Volkswagen

4.4.1 SWOT Analysis


4.5 General Motors

4.5.1 SWOT Analysis


5. Conclusion

3 Sample Section of the Report

3.1 Passenger Cars

Over the past few years, the Brazilian passenger car production has been continuously rising. Supported

by factors like, growing local demand and increasing popularity of country’s compact cars in overseas

markets, car production in Brazil witnessed a y-o-y growth of over 6 per cent between 2007 and 2008

(see figure 2-1). However, in 2009, the growth remained quite low (a little over 1 per cent y-o-y) as

compared to previous year. This low growth rate was attributed to the decline in the demand from US

and European regions due to the impact of global financial crisis.

Figure 3-1: Brazil – Production of Passenger Cars (Million Units), 2007-2010

Source: Associação Nacional dos Fabricantes de Veículos Automotores (ANFAVEA), RIS Estimates

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As per experts, in future, the country’s car production is expected to attain its pre recessionary growth

levels. This is because of the rising purchasing power of the country’s middle class, auto financing

strategies adopted by leading banks, lowering interest rates and increasing demand from export

markets like the US and Europe.

3.2 Light Commercial Vehicles (LCV)

Over the years, LCV production in Brazil has been growing rapidly. The strong growth in the country’s

ethanol/flex fuel LCV production base strengthened the growth in the country’s overall LCV production

volume. The surging use of LCV’s in short and medium distance logistic applications is also fueling

growth in its demand and boosting production levels in the country. As a result, the number of LCVs

produced in the country reached close to 459 thousand units by 2008-end, up from approximately 412

thousand units in 2007. However, in 2009, the production level of LCVs declined by over 2 per cent due

to stricter credit availability to small and medium-size businesses for purchase of LCVs for their in-house

utilization (see figure 2-2).

Figure 3-2: Brazil – Production of Light Commercial Vehicles (Thousand Units), 2007-2010

Source: ANFAVEA, RIS Estimates

In 2010, the production of LCVs in Brazil is projected to reach around 550 thousand units at a y-o-y

growth of over 22 per cent. This growth is attributed to the declining impact of the financial crisis, rising

disposable income and better road connectivity between the country’s urban and rural areas. Moreover,

the country’s SMEs which have been the key consumer segment of LCVs in the past, is showing

encouraging LCV purchase trend once again amid easing credit availability and growing industrial

production.

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Brazil Automobile

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