Is there any logic to Brazil's auto market?

09 Jul 2013 IHS Markit Automotive Expert

Several protests took place in Brazil during the month of June. Everything started with public transportation fares that were increased, although the increases were less than $0.10. And even after the increase was cancelled, protests kept going on, focusing on corruption, the amount spent to build stadiums for the World Cup, poor educational and health systems despite high taxes, amongst other things. (For more about the protests, see the links at the bottom of the blog.)

Ironically, protests that stopped the main cities of the country did not impact the registration of new light vehicles. Almost 303,000 units were registered in June according to preliminary figures - a deviation of a mere -0.2% from Polk's light vehicle forecast of 302,237 units.

It is true that registrations fell 11% from a year ago, but only because June 2012 was such a great month. Last year, tax incentives played a major role in light vehicle registrations and June was the first full month benefiting from them. As a result, it was the third best month for sales in 2012. However, registrations from last month increased 0.8% compared to May.

The Brazilian market does not follow economic, or even social logic. Last year, for example, GDP growth was only 0.9% but light vehicle sales soared 6.1%. While the U.S. market dropped 22% in 2009, Brazilians bought 13.4% more light vehicles. During 2009, the government also reduced taxes to keep the market alive.

Economic Growth vs. Automotive Growth

I never believed that next year's World Cup and the 2016 Summer Olympic Games would drag more people to dealers. The country literally stops to watch Brazil play during a World Cup, and I see customers going to stadiums and watching other national teams playing there. But I may be wrong. People may not be watching the games, they may be too busy protesting! But I'm fairly sure that whatever they are doing, they will not be buying new cars.

Note: You can read more about the protests with these links:

Augusto Amorim is senior analyst, South American light vehicle production forecast, IHS Automotive

Posted on July 09, 2013


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