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Plant closures in Brazil likely to cause only short-term impact on South American production
In February 2021, IHS Markit forecasted that the total truck production volumes for South America region will touch 109,000 units in CY 2021 out of which, manufacturers in Brazil are expected to produce 103,000 trucks. Within last few days, major truck manufacturers in Brazil have made announcements to temporarily cease operations in their truck manufacturing plants citing two major reasons: increasing number of COVID-19 cases in the country and a lack of semiconductor parts used in the manufacturing of vehicles.
Major OEMs including Volvo, Scania, Mercedes Benz, and Volkswagen are either shutting down their plants or reducing production in Brazil starting from this week in March until the end of the first week in April 2021. Volvo will reduce production of trucks at the Curitiba plant by 70% from the March 23-31. Scania, on the other hand will cease production in São Bernardo do Campo plant, starting on March 26 and resume activities on April 5. Volkswagen Trucks will most likely keep its plant closed from March 29 - April 7 for the holidays in the state of Rio de Janeiro in Brazil. Mercedes Benz on the other hand will suspend activities in its Brazilian plants from March 26-April 5 citing the same reason as Scania. Other major players have not yet announced any plant closures, however, will most likely join the trend.
Keeping the above-mentioned reasons mind, IHS Markit expects a combined loss of 3,100 to 3,400 truck units in production across all major OEMs in Brazil for the said closure of plants (from March 23/24 until April 5). This is however, not expected to impact the total forecasted production volumes figures for CY 2021 as we anticipate the manufacturers to pick up pace and recover these lost productions in the second half of this year. The boost in production will be fueled by increased demand for heavy trucks from agribusiness and expected recovery in exports to other countries from Brazil. Do note that the current loss in production volumes are based off information we have and might change if the OEMs increase the span of plant closures further or continue to reduce production lines rates because of either COVID-19 or shortage of semiconductor parts.
- Kushagra Bahukhandi, Automotive Analyst, IHS Markit
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