Where to next for the Brazilian automotive sector?

Thiago Villa

The automotive industry is of huge significance to the global economy. In 2019 alone, more than 91 million cars, vans and buses were produced worldwide (corresponding to a gross revenue of more than US $ 2.27 trillion dollars).

The industry has taken a significant hit due to the Covid-19 Pandemic, with the numbers in production of vehicles being cut by nearly a third for 2020.

Adjacent to this, the industry is in a period of profound change that will present both challenges and new opportunities in the future.

In this blog post, we briefly examine these trends in relation to the Brazilian automotive market

The Brazilian automotive market in 2020

According to a 2021 to the Brazilian Automotive Industry Yearbook, produced by ANFAVEA, the auto industry in Brazil has been hit hard by the pandemic. Sales to the domestic market closed the year 2020 with 2,058,437 units, a drop of 26.2%.

In addition, various vehicle factories were forced to close their doors in 2020 due to supply shortages to produce vehicles, further resulting in shortages in the national consumer market. In terms of the global ranking, Brazil currently occupies ninth place.

Notably, the trucking industry, driven by agribusiness and the growth of e-commerce, was the one that obtained the lowest losses among vehicles, with an 11.5% drop in licensing compared to 2019. Light commercial vehicles fell 16%, automobiles 28,6% and buses 33.4%. Agricultural and road machinery, on the other hand, grew by 7.3%.

The lack of parts in the automotive sector may continue for some time. This means that, to reduce costs and protect themselves from market movements like this, automakers and their suppliers will look for innovative solutions in the market, for example by establishing partnerships and mergers with other companies.

A changing Brazilian automotive sector – Rota 2030

While the automotive industry is recovering from recent setbacks, the industry is going through exponential change. This is apparent from the modern technologies being introduced into the market due to factors such as digital transformation, automation, and urban mobility, naming just a few examples. In addition, the push to implement green technologies in the automotive industry (for example, hybrid or electric cars) has never been greater, bringing another push factor for innovation in the sector.

In 2018, already aware of these momentous changes to the industry, the Brazilian Federal Government launched the “Rota 2030 Program – Mobility and Logistics”. The program seeks to advance development of the automotive sector, and comprises market regulations, a special tax regime for importing auto parts without equivalent national production, as well as priority programs for small and medium companies in the auto parts sector, startups, and research institutions.

The Rota 2030 Program takes the transformation in automotive sector into account, seeking amongst other things to increase investment in research and development in the country, to stimulate the production of modern technologies and innovation, and to set bold targets on energy efficiency and safety.

We are monitoring all the latest news in respect of the automotive industry in Brazil and will keep our clients and partners informed of developments. Please contact us if you would like to discuss any matter further.

The automotive industry is of huge significance to the global economy. In 2019 alone, more than 91 million cars, vans and buses were produced worldwide (corresponding to a gross revenue of more than US $ 2.27 trillion dollars).

The industry has taken a significant hit due to the Covid-19 Pandemic, with the numbers in production of vehicles being cut by nearly a third for 2020.

Adjacent to this, the industry is in a period of profound change that will present both challenges and new opportunities in the future.

In this blog post, we briefly examine these trends in relation to the Brazilian automotive market

The Brazilian automotive market in 2020

According to a 2021 to the Brazilian Automotive Industry Yearbook, produced by ANFAVEA, the auto industry in Brazil has been hit hard by the pandemic. Sales to the domestic market closed the year 2020 with 2,058,437 units, a drop of 26.2%.

In addition, various vehicle factories were forced to close their doors in 2020 due to supply shortages to produce vehicles, further resulting in shortages in the national consumer market. In terms of the global ranking, Brazil currently occupies ninth place.

Notably, the trucking industry, driven by agribusiness and the growth of e-commerce, was the one that obtained the lowest losses among vehicles, with an 11.5% drop in licensing compared to 2019. Light commercial vehicles fell 16%, automobiles 28,6% and buses 33.4%. Agricultural and road machinery, on the other hand, grew by 7.3%.

The lack of parts in the automotive sector may continue for some time. This means that, to reduce costs and protect themselves from market movements like this, automakers and their suppliers will look for innovative solutions in the market, for example by establishing partnerships and mergers with other companies.

A changing Brazilian automotive sector – Rota 2030

While the automotive industry is recovering from recent setbacks, the industry is going through exponential change. This is apparent from the modern technologies being introduced into the market due to factors such as digital transformation, automation, and urban mobility, naming just a few examples. In addition, the push to implement green technologies in the automotive industry (for example, hybrid or electric cars) has never been greater, bringing another push factor for innovation in the sector.

In 2018, already aware of these momentous changes to the industry, the Brazilian Federal Government launched the “Rota 2030 Program – Mobility and Logistics”. The program seeks to advance development of the automotive sector, and comprises market regulations, a special tax regime for importing auto parts without equivalent national production, as well as priority programs for small and medium companies in the auto parts sector, startups, and research institutions.

The Rota 2030 Program takes the transformation in automotive sector into account, seeking amongst other things to increase investment in research and development in the country, to stimulate the production of modern technologies and innovation, and to set bold targets on energy efficiency and safety.

We are monitoring all the latest news in respect of the automotive industry in Brazil and will keep our clients and partners informed of developments. Please contact us if you would like to discuss any matter further.

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