Brazil’s Carmakers Intent on Taking on the World

Following the example of other sectors in industry, Brazilian carmakers have started diversifying their international markets. In the past, sales were practically limited to the domestic market and to Latin America.

Companies in the sector now also ship their cars, trucks, buses and engines to destinations that are as diverse as Russia, India, the United States, Australia and countries in Africa, the Middle East and Europe.


Most of the car factories installed in Brazil belong to large multinationals. That is where the strategy of answering mainly to the Latin American countries comes, as other markets are, or at least were, supplied by other company units.


The search for new markets started taking place, according to specialists, due to three factors. In the first place, in recent years, companies made investment in productive capacity, but at the same time the domestic market shrank, causing them to seek customers outside.


Another reason was the devaluation of the Brazilian real against the dollar and the euro, which, together with a great productive scale, made the price of Brazilian vehicles more competitive on the foreign market.


The third determinant factor was that most of the models exported to new markets are produced exclusively in Brazil. These vehicles are used to complement the line of products offered by the head office and other company units.


“As production cost in Brazil is lower than that of countries like Italy and Germany, for example, carmakers are considering Brazil an export platform,” stated the foreign relations director of the Center of Industries of the State of São Paulo (Ciesp), Maurice Costin.


In the same line, the executive export manager at Volkswagen Brazil, Leonardo Soloaga, stated that even with the increase of sales on the domestic market and with exports last year, factories in the country still have unused capacity.


Last year, carmakers produced 2.2 million vehicles, 20.7% more than that registered in 2003, but still less than the company productive capacity. “The sector has a capacity for production of 3 million units a year, therefore there is still space for growth,” stated Soloaga.


The Arab countries are a good example of market diversification. According to information supplied by the Foreign Trade Secretariat (Secex), in 2004, auto exports generated US$ 78.1 million to the companies, against US$ 37.3 million in 2003.


In the case of buses, the shipping totalled US$ 29 million in 2004, against US$ 11.4 million in 2003. Cargo vehicle sales, in turn, rose from US$ 13.4 million in 2003 to US$ 43.6 million in 2004. In the three categories shipping more than doubled from one year to the next.


According to Costin and Soloaga, Brazilian products end up having good acceptance in emerging markets, as, in the case of cars, for example, they are compact, economic and easily adaptable to different realities, i.e., to developing markets.


Brands


Volkswagen, for example, exports its Gol family (which includes the Gol hatchback, the Parati station wagon and the Saveiro pickup), the Fox and the Polo Sedan.


“These are cars of easy and fast adaptation. For Russia, for example, some changes are made to the engine so as to resist the cold, whereas to Morocco they receive a second radiator due to the heat,” stated Soloaga.


Volkswagen Brazil sold 8,533 vehicles in the Arab countries last year, against 2,059 in 2003, much more than the forecast at the beginning of 2004, which had been that between 3,000 and 3,500 vehicles would be exported to the region.


The main destinations were Morocco, Syria, Algeria and Egypt. “The market was open in 2003 and we began exporting greater volumes in 2004,” stated Soloaga.


Also in the past, the company head office signed a contract for the construction of an assembly line in Abu Dhabi, in the United Arab Emirates, to be supplied mainly by disassembled vehicles produced in Brazil.


In April, the Brazilian made Fox will start being sold in Germany. “We are proceeding with our strategy of opening new markets,” declared Soloaga.


In the case of Fiat, the Arab countries already have greater participation in exports. The carmaker, installed in the city of Betim, in the southeastern Brazilian state of Minas Gerais, shipped 9,809 units to the region in 2004, against 1,863 in 2003, having Algeria, Morocco and Tunisia as main destinations.


The Arab world answered to 12.7% of total company exports. According to information provided by a company spokesperson, this result is due to a “more aggressive policy” by the Brazilian Fiat subsidiary for the opening of new markets in North Africa.


Some carmakers exported to the region for the first time. This is the case of Ford, which shipped 600 units of their small Courier pickup to Syria. The company exported and liked it.


“The Middle East is a market where we have never been, as is Africa. The perspectives are promising,” stated the export director of Ford South America, Dante Marchiori, according to information supplied by a company spokesperson.


Like Volkswagen, Ford sold a model that is produced exclusively in Brazil. For this year, the company intends to sell more than 900 units of the Courier to the country and is studying the possibility of introducing other models to that market, as is the case with the EcoSport jeep and the Fiesta hatchback.


DaimlerChrysler Brazil, in turn, expanded its space on the Arab market even further. The company sold 1,700 units to the region last year, among them trucks and buses, against 1,300 in 2003. The main destinations were Egypt and Jordan.


“Nowadays, outside Latin America, the Middle Eastern market is the main buyer of DaimlerChrysler Brazil commercial vehicles, and we hope that this partnership may rise in years to come,” stated the company.


Renault and Volvo, both installed in the southeastern Brazilian state of Paraná, also export to the Arabs. In the case of the company of French origin, around 1,000 units of the Clio compact vehicle were shipped to Algeria. The Brazilian subsidiary of the Swedish multinational, in turn, exported 72 heavy trucks to Saudi Arabia.


Other carmakers installed in the country also export, as is the case with Honda, Peugeot/Citroí«n, Nissan, Mitsubishi and Toyota, but they have not yet sold to the Arabs.


In all, the Brazilian industry had revenues of US$ 8.3 billion with the export of vehicles, agricultural machinery, and engines last year, an increase of 51.8% when compared to 2003.


Translated by Mark Ament


ANBA – Brazil-Arab News Agency
www.anba.com.br

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