As US light vehicles sales topped 17 million in 2019 for the 5th consecutive year, Chris Hopson takes a look at the… https://t.co/YWcwD6o06a
Brazilian light-vehicle registrations increase in 2018, exports drop
Brazilian light-vehicle (LV) registrations grew 13.8% in 2018 and this sales trajectory has continued in January 2019 with an 8.7% year-on-year (y/y) increase. However, Brazil's LV registrations declined 15.2% month on month (m/m) in January. With Brazil's LV exports continuing to be weak, LV production in January declined 10.5% y/y, according to data from the National Association of Motor Vehicle Manufacturers (Associação Nacional dos Fabricantes de Veículos Automotores: Anfavea). After falling significantly in 2016, LV registrations rose 9.4% in 2017 and 13.8% in 2018, and 2019 has started off with growth, as expected. Brazilian LV sales have shown strength on improved credit availability, which continued to improve in 2018 as Argentina's market slid. A one-off truckers' strike in May 2018 only temporarily held the Brazilian market back. While the sales improvements were enough to offset export declines for a net gain in production in 2018, production in 2019 has started off weak.
Outlook and implications
Increases in credit availability continue to support gains in the Brazilian light-vehicle (LV) market; LV sales reached 2.47 million units in 2018 and are forecast to increase 10.2% in 2019. January's data continued the trend in late 2018 relative to LV production and exports. Brazil's LV exports are soft on a weakening Argentinian market. IHS Markit forecasts Brazil's LV production will reach 4.15 million units in 2027, compared with 2.74 million units in 2018. Brazil's market is seeing a V-shaped recovery, rather than the U-shaped recovery previously expected.
While the auto industry believes that 2017 was a turnaround year and the country saw double-digit growth in 2018, IHS Markit notes that it is important to understand how and why this is so. Although the market has been resilient to political issues, growth is also related to financing and sales strategies, an impact again seen in the sales increases in the second half of 2018. First, there has been a drastic push of direct sales and growth of fleet volume. Second, the gains in financing are primarily driven by one bank that wants to continue growing its presence in Brazil. Thus, to say that the consumer is back would not be fully appropriate. Despite the sales performance in 2018, caution remains. In addition, the weak performance in Argentina is creating opportunity for increased sales in Brazil. In the last four months of 2018, credit was further fueled as funds were made available in Brazil instead of Argentina; when the spigot dried up in Argentina, OEMs sent Brazil into high gear and are keeping it there so far.
Brazil's market remains in for a long recovery. With little change in the economic situation expected, there are no main drivers of light-vehicle sales in the next few years. IHS Markit forecasts LV sales will not break 3.0 million units until 2021. After that, IHS Markit expects a stronger recovery, with sales forecast to reach 3.48 million units in 2025. The potential for Brazil is there, but getting there will be a complicated process.
Read more articles like this one. Get a free trial to AutoIntelligence Daily
- US DOT releases latest version of federal guidelines for automated vehicles
- Vehicle production in Turkey declines 6% y/y during 2019
- South Korea to increase e-mobility subsidy budget for 2020
- Tesla plans production of up to 500,000 upa at new German plant
- Automotive Industry Leaders Join IHS Markit in Key roles
- CES 2020: Technology drives architecture transformation in the vehicle, bringing disruption and opportunity
- Ola signs up over 10,000 drivers ahead of London launch
- EU passenger car registrations grow 4.9% y/y during November – ACEA