Rising demand and government incentives are prompting foreign carmakers to boost their investment in Brazil, which analysts say could become the third-largest auto market in the world as early as 2015.
Industry group ANFAVEA forecast that domestic sales of cars and light commercial vehicles may grow by 4 to 5 percent this year compared to last year, to up to 3.81 million vehicles.
Production is slated to reach 3.49 million units, up about 2 percent from last year, the National Association of Motor Vehicle Manufacturers added.
Photo: Reuters
On Thursday, Japanese giant Toyota inaugurated its third plant in Brazil, in the southeastern town of Sorocaba, with the goal of producing 70,000 new Etios compact models a year.
A modified version of a model already being sold in India and South Africa, the Etios will be available from next month, priced at an average of US$17,300 to compete with similar models from Volkswagen, Fiat, General Motors and Hyundai.
Toyota, in Brazil since 1958, said it also planned to begin selling the Prius, its popular hybrid electric car, in Brazil later this year and to invest US$495 million to build an engine plant near Sorocaba.
With a share of the Brazilian auto market of less than 3 percent last year, the Japanese carmaking giant lags behind leading players Fiat, Volkswagen and General Motors.
However, the world’s biggest carmaker plans to double its sales in Brazil to about 200,000 vehicles in the next two years and become one of market leaders in the next decade.
Brazilian Industry Minister Fernando Pimentel said the Sorocaba plant, which employs 1,500 workers, amounted to a vote of confidence by Toyota “in the strength of the Brazilian economy and the Brazilian auto market.”
Although sales dropped 1.2 percent in the first half of this year, leading carmakers and analysts are generally upbeat about the future.
“The Brazilian economy is going to post solid growth in the second half of the year. Interest rates [now down to a record low of 8 percent] will continue to decline and credit will continue to expand,” ANFAVEA president Cledorvino Belini said on Monday last week.
Home to 191 million people, Brazil currently ranks as the world’s fourth-largest car market behind the US, China and Japan.
The industry, which employs 147,000 people, contributes roughly 5 percent of Brazil’s GDP.
However, rising demand for better quality cars by the country’s expanding middle class — now estimated at 95 million people — a low motorization rate (333 cars per 1,000 inhabitants), the absence of domestic producers and government incentives offer good prospects for foreign makers, analysts say.
Roland Berger Strategy Consultants estimates that Brazil, the world’s sixth-largest economy, could displace Japan as the world’s third-biggest market by 2015 and sales rise to 6.6 million vehicles by 2020.
In April, the government introduced new rules to make the auto industry more competitive.
The rules require carmakers to increase regional content by purchasing more locally produced spare parts, invest in engineering and innovation and improve car fuel efficiency, or face higher taxes.
Sao Paulo state, where nearly half of the national auto industry is concentrated, also provides tax breaks to attract foreign makers.
South Korea’s Hyundai is also set to begin production at a US$600 million plant in the state next month while Nissan, Fiat, Volkswagen and PSA Peugeot Citroen are expanding their plants or building new ones.
However, analysts said foreign carmakers face a host of problems such as high production costs due to relatively expensive wages, a lack of automation and low productivity.
General Motors, for example, is facing growing unrest from workers at its plant in the industrial hub of Sao Jose dos Campos over its plans to cut 1,840 jobs at a struggling production line.
The two sides have agreed to delay the cuts until at least November.
The US carmaker told Sindicato dos Metalurgicos trade union representatives it intends to shut down the production line, which has already stopped making Zafira, Merica and Corsa models and would not make any new investments in Sao Jose dos Campos due to “structural adjustments.”
The workers have appealed to the federal government to intervene to save their jobs.
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to