Brazil tempts automakers

25 January 2010

RIO DE JANEIRO: Fiat, Volkswagen and Ford are all turning their attention to Brazil, as they try to find ways of offsetting declining sales in many other areas of the globe.

According to Anfavea, the automotive industry body, Brazil is the fifth largest car market in the world at present, and its position is likely to improve in the future.

Sales in the domestic auto sector rose by 11% in 2009, to 3.14 million units overall, despite the onset of the economic downturn.

Jackson Schneider, president of the organisation, said "no vehicle assembler who wants to remain a big global player can afford not to include Brazil in terms of market strategy and product."

Fiat, the Italian operator, sold a total of 736,969 cars in the South American country last year, and plans to spend R$1.8 billion ($990m; €701m; £614m) this year in Brazil and Argentina to enhance its position in the region.

Volkswagen, its German rival, has similarly stated that it will invest R$6.2bn in Brazil over the period to 2014, having made 686,408 deliveries over the course of 2009 as a whole.

This figure stood at 304,000 for Ford, and the US company will direct $R4bn of funding to expand its local operations between 2011 and 2015.

Marcos de Oliveira, the Detroit-based firm's president for Brazil and Mercosul, said "Brazil is the third biggest market for Ford in volume terms after the US and the UK."

"The big difference is the stability Brazil has achieved over the past ten years, with inflation under control, with the availability of credit growing continuously, where interest rates may be still high but have fallen a lot."

At present, de Oliveira argues that the average vehicle in the rapidly-growing economy typically has between six and seven inhabitants, a figure that stands at just 1.2 in the US.

"That shows there's a long way to go, a lot of vehicles to be sold, before we close the gap," he said.

Fernando Trujillo, an analyst at CSM Worldwide, predicted that total sales and production levels in Brazil would expand from 3 million last year to 4.5 million by 2016.

"I don't know if this is enough to save automakers. What is certain is they are suffering overseas and they won't suffer here," he said.

Data sourced from Financial Times; additional content by Warc staff