The Brazilian Automotive Industry
The Brazilian Automotive Industry Peter Munck Director, SouthPartner
GO GLOBAL BRAZIL 2011 SEMINAR Jönköping, Sweden February 10, 2011
Brazilian Automotive Industry THE BRAZILIAN AUTOMOTIVE INDUSTRY WAS BORN IN 1956 Though GM and Ford had local assembly plants since the 20’s, real manufacture started under President Juscelino Kubichek (1956-1960). Coherent with of the “Import Substitution” industrial development policy, in 1956 the “Automotive Industrial Executive Group” was formed VW, Marcedes Benz, Ford, GM, Scania, Willys, Simca, built their plants along the main highway connecting Sao Paulo to the port of Santos By the end of the decade Brazilian made cars and trucks were a reality In 1960 the first exports to neighboring countries take place During the 60’s, additional entrants arrived: Chrysler, Karmann Ghia, Toyota, Ford tractors, Massey Ferguson, Valmet, etc BY THE END OF THE 60’s, THE AUTOMOTIVE SEGMENTWAS ONE OF BRAZIL’S MOST IMPORTANT INDUSTRIES AND GROWING FAST
Brazilian Automotive Industry MANY HURDLES HAD TO BE OVERCOME IN THE INITAIL PHASES Non-existent local supplier base: “What does Dona (Mrs.) Mercedes actually do? Lack of skilled labor: Case of Scania’s HR manager, Gunnar Lindquist. o
“We hire workers. Minimum qualification: high-school. We’ll train you for the job
o
We hire workers. We’ll teach you how to read and write and train you for the job
Lack of demand for vehicles: Mesbla’s demand forecast of VW Beatle: o
In Brazil the rich want nice American cars
o
The nearest to a car a poor person will get to it is when washing it
o
Give up, the poor will not be able to afford cars => 20 years later Mesbla was the largest VW dealer in Brazil Source: Automotive Business (Brazil), ANFAVEA, Sindipeças
Brazilian Automotive Industry THE BRAZILIAN AUTOMOTIVE INDUSTRY HAS DEVELOPED VASTLY SINCE HUMBLE ORIGINS In 2010 production volumes surpassed 3,6 Million units Capacity of nearly 3,8 million units and rising fast Counts on 25 vehicle makers with 50 factories Sales of nearly 80 billion USD (including auto-parts) representing 23% of industrial GDP and 5% of total GDP Is supplied by 500 auto-parts makers; interacts with 200.000 companies Employs directly and indirectly 1.5 million people (125.000 direct by automakers) Has a sales network of nearly 4500 dealers Invested 47 billion USD in the period of 1994 – 2009 Exported 14 billion USD and imported 17 billion USD in 2009 Four world center for technology research & development
Source: Automotive Business (Brazil), ANFAVEA, Sindipeças
Brazilian Automotive Industry THE INDUSTRY IS HIGHLY DIVERTSIFIED COUNTING ON THE PRESENCE ON NEARLY ALL WORLD PLAYERS • • •
• • • • • • • • •
AGCO (Agricultural machines) Agrale (Light trucks &Tractors) Case New Holland (Tractors, agricultural and construction machines) Catterpillar (construction machines) Fiat (Cars & light commercial) Ford (cars, trucks, bus chassis and tractors) General Motors (Cars & light commercial) Honda (Cars) Hyundai (Cars & light commercial) International (Trucks) John Deere (Agricultural machines) Iveco (Trucks & bus chassis )
• • • • • • • • • • • • •
Komatso (construction machines) MAN (Trucks & bus chassis ) Mercedes Bens (Trucks & bus chassis ) Mitsubishi (Light commercial) Nissan (Light commercial) Peugeot Citroën (Cars, light commercial) Renault (Cars, light commercial) Scania (Trucks & bus chassis) Toyota (Cars) Valtra (Tractors) VCE (construction machines) Volkswagen (Cars & light commercial) Volvo (Trucks & bus chassis)
Brazilian Automotive Industry THE VIABILITY OF THE BIRTH OF INDUSTRY WAS BASED ON THE OVERALL “IMPORT SUBSTITUTION” INDUSTRIAL DEVELOPMENT POLICY OF THE GOVERNMENT Nearly 100% of the component of vehicles had to be made locally (few exceptions permitted) Importation of vehicles were forbidden As a result, it attained special characteristics
Few models
Models changes were expensive and making some survive for decades - VW Beatle produced from 1957 to 1995 - Opala by GM (based on Opel Record) lasted from 1970 to 1999
Generally speaking vehicles were based obsolete technology and commercialized at high prices relative to the rest of the world
The policy of strong protection of the “infant industry ” remained in place until early 90’s, i.e. lasted over 30 years Source: Automotive Business (Brazil), ANFAVEA, Sindipeças
Brazilian Automotive Industry THROUGHOUT ITS DEVELPMENT VARIOUS IMPORTANT CHANGES TOOK PLACE Regionalization started in the 70’s and has since continued
Plants originally concentrated near city of Sao Paulo (ABC)
In 1975 Fiat started its plant in Betim in state of Minas Gerais
In 1978 Volvo opened it factory in Curitiba, Parana
Subsequent new entrants and additional plants followed this trend
In the end of the 70, the 1st alcohol driven car program was launched and lasted until early 90s when it was phased out due to lack of demand when gasoline became cheap again In 1991, the import substitution barrier was torn down and the industry subjected to foreign competition thus heralding the current phase of internationalization of the industry, i.e. no longer Infant Industry The latest trend has been the introduction of Flex Fuel passenger cars 10 years ago which today account for 97% of production
Brazilian Automotive Industry TODAY THE BRAZILIAN AUTOMOTIVE INDUSTRY IS ONE OF THE MOST VIGOROUS IN THE WORLD. Production volumes increased from around 1.5 million units a year a decade ago to over 3,6 million in 2010 making it the 6th largest in world in terms (4th in sales volumes) The Brazilian automotive industry counts on the presence of nearly all world players, both in terms of vehicle makers and suppliers Practically unscathed during the recent recession and propelled by strong internal economic expansion, production volumes are forecasted to reach nearly 5 million units in 2015 To nourish the strong increase in volumes, investments of over USD 22 billion in the coming years are in the pipeline
Source: Automotive Business (Brazil), ANFAVEA, Sindipeças
Brazilian Automotive Industry PRODUCTION VOLUMES HAVE RISEN SHARPLY IN RECENT YEARS WITH PROSPECT OF HEALTHY GROWTH IN COMING YEARS Vehicle Production Volumes in Brazil 6000
5000
4000
3000
2000
1000
0 1999
2000
2001
2002
Source: ANFAVEA, Sindipeças
2003
2004
2005
2006
2007
2008
2009
2010 forecast
forecast 2015
Brazilian Automotive Industry BRAZIL IS TODAY ONE OF THE LEADING VEHICLE MAKING COUNTRIES Country Comparison – Production and sales (2010) Millions of units 20 18 16 14 12 10
Production Sales
8 6 4 2 0 China
Japan
Source: Automotive Business Brazil
USA
Germany
S. Korea
Brazil
Brazilian Automotive Industry MAJOR INVESTMENTS HAVE BEEN ANNOUNCED BY THE KEY PLAYERS IN THE COMING YEARS Company
Billion USD
Fiat Group 2010 - 2015 Ford 2010 - 2015 GM until 2012 Honda Hundai MAN until 2015 Mercedes Benz Mitsubishi Peugot - Citroën until 2012 Renault until 2012 Toyota Volkswagen until 2014 Volvo until 2011
3,78 2,78 1,67 0,20 0,94 0,56 0,67 0,44 0,78 0,56 0,70 3,44 0,23
Auto Parts Makers 2010 - 2015
6,00
TOTAL Source: Automotive Business (Brazil)
22,74
Brazilian Automotive Industry Mahindra/Bramont Troller Ford
Ford John Deere Mitsubishi Hyundai
Volkswagen, Nissan, Renault, CNH Case IH, CNH New Holland, Volvo
AGCO, Agrale, International, Volare, GM, John Deere
Fiat Automoveis CNH Case CE CNH New Holland Iveco Mercedes Benz PSA MAN Toyota, Valtra, CNH Case CE, CNH Case, Caterpillar, Mercedes-Benz, Ford, Iveco, Scania, Volkswagen,General Motors, Honda, Komatsu, Volkswagen
Brazilian Automotive Industry
Source: Automotive Business (Brazil), ANFAVEA, Sindipeças
Brazilian Automotive Industry
Source: Automotive Business (Brazil), ANFAVEA, Sindipeças
Brazilian Automotive Industry Production Volumes 1980 – 2010 1000’s of units 4000
3500
3000
2500
2000
1500
1000
500
0
Source: ANFAVEA,
Brazilian Automotive Industry Investments 1980 – 2009 Million USD
(*Period 2010 to 2015 is estimated based on identified investments in Aug 2010 of 23 BUSD) 4000 3500 3000 2500 2000 1500 1000 500 0
Source: Automotive Business (Brazil), ANFAVEA, Sindipeças
Brazilian Automotive Industry Direct employment 1980 – 2010 Thousands of workers 180 160 140 120 100 80 60 40 20 0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: Automotive Business (Brazil), ANFAVEA, Sindipeças
Brazilian Automotive Industry Automotive Fleet (2007) Million of units 300
250
200
150
100
50
0 Brazil
Mexico
Germany
United Kingdom
France
Source: Automotive Business (Brazil), ANFAVEA, Sindipeças
Japan
Italy
USA
Brazilian Automotive Industry Number of inhabitants per vehicle (2006) 8
7
6
5
4
3
2
1
0 Brazil
Mexico
Germany
United Kingdom
France
Source: Automotive Business (Brazil), ANFAVEA, Sindipeças
Japan
Italy
USA
Brazilian Automotive Industry THE CHALLENGE OF THE RISING IMPORTS AND DECLINING EXPORTS Imports vs Exports in %
Exported
569
Imported 489
375
660
Balance 502
368 193
2008
2009
2010
-121 Source: Automotive Business (Brazil), ANFAVEA, Sindipeças
-158
Brazilian Automotive Industry THE CHALLENGE OF THE RISING IMPORTS AND DECLINING EXPORTS Imports vs Exports in %
Exports
30.7
23.5
13,2 5.1
Imports 2005
2006
2007
2008
Source: Automotive Business (Brazil), ANFAVEA, Sindipeças
2009
2010
2011 *
Brazilian Automotive Industry
Conclusion: The Brazilian Automotive Industry is an exiting place to be in the coming years.
Questions?
GO GLOBAL BRAZIL 2011 SEMINAR Jönköping, Sweden February 10, 2011
GO GLOBAL BRAZIL 2011 SEMINAR Jönköping, Sweden February 10, 2011
Brazilian Automotive Industry THE BRAZILIAN AUTOMOTIVE INDUSTRY WAS BORN IN 1956 Though GM and Ford had local assembly plants since the 20’s, real manufacture started under President Juscelino Kubichek (1956-1960). Coherent with of the “Import Substitution” industrial development policy, in 1956 the “Automotive Industrial Executive Group” was formed VW, Marcedes Benz, Ford, GM, Scania, Willys, Simca, built their plants along the main highway connecting Sao Paulo to the port of Santos By the end of the decade Brazilian made cars and trucks were a reality In 1960 the first exports to neighboring countries take place During the 60’s, additional entrants arrived: Chrysler, Karmann Ghia, Toyota, Ford tractors, Massey Ferguson, Valmet, etc BY THE END OF THE 60’s, THE AUTOMOTIVE SEGMENTWAS ONE OF BRAZIL’S MOST IMPORTANT INDUSTRIES AND GROWING FAST
Brazilian Automotive Industry MANY HURDLES HAD TO BE OVERCOME IN THE INITAIL PHASES Non-existent local supplier base: “What does Dona (Mrs.) Mercedes actually do? Lack of skilled labor: Case of Scania’s HR manager, Gunnar Lindquist. o
“We hire workers. Minimum qualification: high-school. We’ll train you for the job
o
We hire workers. We’ll teach you how to read and write and train you for the job
Lack of demand for vehicles: Mesbla’s demand forecast of VW Beatle: o
In Brazil the rich want nice American cars
o
The nearest to a car a poor person will get to it is when washing it
o
Give up, the poor will not be able to afford cars => 20 years later Mesbla was the largest VW dealer in Brazil Source: Automotive Business (Brazil), ANFAVEA, Sindipeças
Brazilian Automotive Industry THE BRAZILIAN AUTOMOTIVE INDUSTRY HAS DEVELOPED VASTLY SINCE HUMBLE ORIGINS In 2010 production volumes surpassed 3,6 Million units Capacity of nearly 3,8 million units and rising fast Counts on 25 vehicle makers with 50 factories Sales of nearly 80 billion USD (including auto-parts) representing 23% of industrial GDP and 5% of total GDP Is supplied by 500 auto-parts makers; interacts with 200.000 companies Employs directly and indirectly 1.5 million people (125.000 direct by automakers) Has a sales network of nearly 4500 dealers Invested 47 billion USD in the period of 1994 – 2009 Exported 14 billion USD and imported 17 billion USD in 2009 Four world center for technology research & development
Source: Automotive Business (Brazil), ANFAVEA, Sindipeças
Brazilian Automotive Industry THE INDUSTRY IS HIGHLY DIVERTSIFIED COUNTING ON THE PRESENCE ON NEARLY ALL WORLD PLAYERS • • •
• • • • • • • • •
AGCO (Agricultural machines) Agrale (Light trucks &Tractors) Case New Holland (Tractors, agricultural and construction machines) Catterpillar (construction machines) Fiat (Cars & light commercial) Ford (cars, trucks, bus chassis and tractors) General Motors (Cars & light commercial) Honda (Cars) Hyundai (Cars & light commercial) International (Trucks) John Deere (Agricultural machines) Iveco (Trucks & bus chassis )
• • • • • • • • • • • • •
Komatso (construction machines) MAN (Trucks & bus chassis ) Mercedes Bens (Trucks & bus chassis ) Mitsubishi (Light commercial) Nissan (Light commercial) Peugeot Citroën (Cars, light commercial) Renault (Cars, light commercial) Scania (Trucks & bus chassis) Toyota (Cars) Valtra (Tractors) VCE (construction machines) Volkswagen (Cars & light commercial) Volvo (Trucks & bus chassis)
Brazilian Automotive Industry THE VIABILITY OF THE BIRTH OF INDUSTRY WAS BASED ON THE OVERALL “IMPORT SUBSTITUTION” INDUSTRIAL DEVELOPMENT POLICY OF THE GOVERNMENT Nearly 100% of the component of vehicles had to be made locally (few exceptions permitted) Importation of vehicles were forbidden As a result, it attained special characteristics
Few models
Models changes were expensive and making some survive for decades - VW Beatle produced from 1957 to 1995 - Opala by GM (based on Opel Record) lasted from 1970 to 1999
Generally speaking vehicles were based obsolete technology and commercialized at high prices relative to the rest of the world
The policy of strong protection of the “infant industry ” remained in place until early 90’s, i.e. lasted over 30 years Source: Automotive Business (Brazil), ANFAVEA, Sindipeças
Brazilian Automotive Industry THROUGHOUT ITS DEVELPMENT VARIOUS IMPORTANT CHANGES TOOK PLACE Regionalization started in the 70’s and has since continued
Plants originally concentrated near city of Sao Paulo (ABC)
In 1975 Fiat started its plant in Betim in state of Minas Gerais
In 1978 Volvo opened it factory in Curitiba, Parana
Subsequent new entrants and additional plants followed this trend
In the end of the 70, the 1st alcohol driven car program was launched and lasted until early 90s when it was phased out due to lack of demand when gasoline became cheap again In 1991, the import substitution barrier was torn down and the industry subjected to foreign competition thus heralding the current phase of internationalization of the industry, i.e. no longer Infant Industry The latest trend has been the introduction of Flex Fuel passenger cars 10 years ago which today account for 97% of production
Brazilian Automotive Industry TODAY THE BRAZILIAN AUTOMOTIVE INDUSTRY IS ONE OF THE MOST VIGOROUS IN THE WORLD. Production volumes increased from around 1.5 million units a year a decade ago to over 3,6 million in 2010 making it the 6th largest in world in terms (4th in sales volumes) The Brazilian automotive industry counts on the presence of nearly all world players, both in terms of vehicle makers and suppliers Practically unscathed during the recent recession and propelled by strong internal economic expansion, production volumes are forecasted to reach nearly 5 million units in 2015 To nourish the strong increase in volumes, investments of over USD 22 billion in the coming years are in the pipeline
Source: Automotive Business (Brazil), ANFAVEA, Sindipeças
Brazilian Automotive Industry PRODUCTION VOLUMES HAVE RISEN SHARPLY IN RECENT YEARS WITH PROSPECT OF HEALTHY GROWTH IN COMING YEARS Vehicle Production Volumes in Brazil 6000
5000
4000
3000
2000
1000
0 1999
2000
2001
2002
Source: ANFAVEA, Sindipeças
2003
2004
2005
2006
2007
2008
2009
2010 forecast
forecast 2015
Brazilian Automotive Industry BRAZIL IS TODAY ONE OF THE LEADING VEHICLE MAKING COUNTRIES Country Comparison – Production and sales (2010) Millions of units 20 18 16 14 12 10
Production Sales
8 6 4 2 0 China
Japan
Source: Automotive Business Brazil
USA
Germany
S. Korea
Brazil
Brazilian Automotive Industry MAJOR INVESTMENTS HAVE BEEN ANNOUNCED BY THE KEY PLAYERS IN THE COMING YEARS Company
Billion USD
Fiat Group 2010 - 2015 Ford 2010 - 2015 GM until 2012 Honda Hundai MAN until 2015 Mercedes Benz Mitsubishi Peugot - Citroën until 2012 Renault until 2012 Toyota Volkswagen until 2014 Volvo until 2011
3,78 2,78 1,67 0,20 0,94 0,56 0,67 0,44 0,78 0,56 0,70 3,44 0,23
Auto Parts Makers 2010 - 2015
6,00
TOTAL Source: Automotive Business (Brazil)
22,74
Brazilian Automotive Industry Mahindra/Bramont Troller Ford
Ford John Deere Mitsubishi Hyundai
Volkswagen, Nissan, Renault, CNH Case IH, CNH New Holland, Volvo
AGCO, Agrale, International, Volare, GM, John Deere
Fiat Automoveis CNH Case CE CNH New Holland Iveco Mercedes Benz PSA MAN Toyota, Valtra, CNH Case CE, CNH Case, Caterpillar, Mercedes-Benz, Ford, Iveco, Scania, Volkswagen,General Motors, Honda, Komatsu, Volkswagen
Brazilian Automotive Industry
Source: Automotive Business (Brazil), ANFAVEA, Sindipeças
Brazilian Automotive Industry
Source: Automotive Business (Brazil), ANFAVEA, Sindipeças
Brazilian Automotive Industry Production Volumes 1980 – 2010 1000’s of units 4000
3500
3000
2500
2000
1500
1000
500
0
Source: ANFAVEA,
Brazilian Automotive Industry Investments 1980 – 2009 Million USD
(*Period 2010 to 2015 is estimated based on identified investments in Aug 2010 of 23 BUSD) 4000 3500 3000 2500 2000 1500 1000 500 0
Source: Automotive Business (Brazil), ANFAVEA, Sindipeças
Brazilian Automotive Industry Direct employment 1980 – 2010 Thousands of workers 180 160 140 120 100 80 60 40 20 0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: Automotive Business (Brazil), ANFAVEA, Sindipeças
Brazilian Automotive Industry Automotive Fleet (2007) Million of units 300
250
200
150
100
50
0 Brazil
Mexico
Germany
United Kingdom
France
Source: Automotive Business (Brazil), ANFAVEA, Sindipeças
Japan
Italy
USA
Brazilian Automotive Industry Number of inhabitants per vehicle (2006) 8
7
6
5
4
3
2
1
0 Brazil
Mexico
Germany
United Kingdom
France
Source: Automotive Business (Brazil), ANFAVEA, Sindipeças
Japan
Italy
USA
Brazilian Automotive Industry THE CHALLENGE OF THE RISING IMPORTS AND DECLINING EXPORTS Imports vs Exports in %
Exported
569
Imported 489
375
660
Balance 502
368 193
2008
2009
2010
-121 Source: Automotive Business (Brazil), ANFAVEA, Sindipeças
-158
Brazilian Automotive Industry THE CHALLENGE OF THE RISING IMPORTS AND DECLINING EXPORTS Imports vs Exports in %
Exports
30.7
23.5
13,2 5.1
Imports 2005
2006
2007
2008
Source: Automotive Business (Brazil), ANFAVEA, Sindipeças
2009
2010
2011 *
Brazilian Automotive Industry
Conclusion: The Brazilian Automotive Industry is an exiting place to be in the coming years.
Questions?
GO GLOBAL BRAZIL 2011 SEMINAR Jönköping, Sweden February 10, 2011
