Brazil's Automobile Industry Undergoes Radical Transformation

Strategic Insights -

Brazil's automobile industry is undergoing a significant modernization program, intended to put Brazilian-made cars on streets around the world by the end of the decade. With a $12 billion investment, the industry is shifting from a 20-year protectionist cocoon to a competitive market, driven by the government's free-market policies. Last year, Brazil produced a record 1.4 million cars, leapfrogging over Italy and Mexico to become the world's 10th-largest car maker.

The industry's growth shows no sign of slowing, with General Motors' new economy car, the Corsa, selling out its entire production for this year. Brazilian consumers are snapping up new models, with 100,000 prospective buyers joining the waiting lists. The imports have gained a 6 percent share of Brazil's car market, with 120,000 people in Sao Paulo paying $5 apiece to attend Brazil's first imported car show.

Key Takeaways:

  • Brazilian automobile industry is undergoing a $12 billion modernization program to become competitive globally.
  • Brazil produced a record 1.4 million cars last year, leapfrogging over Italy and Mexico to become the world's 10th-largest car maker.
  • General Motors' Corsa car sold out its entire production for this year, with 100,000 prospective buyers on waiting lists.
  • Imports have gained a 6 percent share of Brazil's car market, with 120,000 people attending the first imported car show in Sao Paulo.
  • Brazilian consumers are buying new models, with domestic sales doubling due to high inflation (45% per month).
  • The industry is discontinuing older cars and introducing new models, with General Motors introducing a new model every six months.
  • Brazil's car industry is expected to produce two million vehicles by the end of the decade, prompting expansion plans by foreign auto makers, including Renault and Toyota.
  • The government's free-market policies and tax reductions (nearly 50% in state and federal taxes) have helped the industry transition.

Statistics:

  • Production of vehicles in Brazil from 1980 to 1994: 80,000 to 1,400,000 (Graph: "Making More Cars")
  • 100,000 prospective buyers joined the waiting list for General Motors' new Corsa car.
  • 120,000 people attended the first imported car show in Sao Paulo.
  • High inflation rate: 45% per month in Brazil.
  • Tax reductions: nearly 50% in state and federal taxes on sales of locally made cars.
  • Total investment: $12 billion in modernization program.

Sources:

  • The New York Times, 1994.
  • John Maier Jr. for The New York Times, 1994.
  • National Association of Manufacturers of Automotive Vehicles, 1994.