Brazilian Automotive Industry: 2012 Figures and 2013 Outlook
Tax Reliefs Leverage Sales in 2012
In 2012, the Brazilian Government adopted measures to stimulate consumption and keep the economy moving. A decree for the reduction of the federal excise tax (IPI – Taxes on Manufactured Products) came into effect in May 2012 and purchases of vehicles, building supplies and appliances were taxed at lower rate.
The automotive industry benefited from the stimulus and car sales reached a new record of 3.8M vehicles sold in 2012, a 4.6% increase compared to 2011. According to the National Association of Vehicle Manufacturers (Anfavea), the results were 400 thousand more vehicles sold than forecast.
Despite the new record, 3.34M vehicles were produced in 2012 compared to 3.41M in 2011, a 1.9% drop: the first production drop in a decade. The reduction was the result of a 20% contraction in exports.
“Inovar-Auto”: Driving the local industry in 2013
Despite the gradual return to usual IPI rates through July 2013, Anfavea’s vice-president predicts a sales growth of up to 4% in the domestic market in 2013. The optimism may be justified based on the new Brazilian Automotive Regime (Novo Regime Automotivo Brasileiro), known as Inovar-Auto.
The new Regime was established by decree that came into force in January 2013 and comprises a series of requirements for automakers. They establish a minimum level of local production, local content, investments in local R&D and engineering, and minimum standards for energy efficiency. If requirements are not met, companies face an extra 30% IPI rate. On the other hand, a discount of up to 4% in the tax is granted to companies who meet minimum standards.
The Brazilian Government expects to drive investments in the domestic automotive industry and according to the Ministry of Development, Industry and Trade (MDIC – Ministério do Desenvolvimento, Indústria e Comércio), the investments on new factories and expansion of existing ones will increase the installed capacity of 453 thousand vehicles per year. The current installed capacity is 4.5M per year.
The companies who have committed to the new regime include:
- Scania Latin America Ltda.
- Ford Motor Company Brasil Ltda.
- Mercedes-Benz do Brasil Ltda.
- Fiat Automóveis S/A
- SNS Automóveis Ltda.
- Renault do Brasil S.A.
- General Motors do Brasil Ltda.
- MMC Automotores do Brasil Ltda. (Mitsubishi)
- Peugeot Citröen do Brasil
- Toyota do Brasil Ltda.
- Volkswagen do Brasil
- Honda Automóveis do Brasil Ltda.
- Nissan do Brasil Automóveis Ltda.
To stimulate the sector, the federal government gave out R$ 2.85 billion in taxes in 2012 and has budgeted a further R$ 5.1 billion in 2013.
Sources: MDIC, Anfavea, Agência Estado, Terra, Exame
For further information on the Brazilian market, please contact Mr. Daniel Berners, dberners@berners-consulting.net.