Brazil auto sales: Things fall apart

by SR on October 12, 2012

Brazil light vehicle sales by month and year (thousand units)

You can’t hold the market up indefinitely

Conclusion: a very poor month for Brazil autos but, as we have noted before, Brazil is a minor market for the Japanese auto OEMs. The main takeaway is that you should think carefully about your exposure to the “three kings” of the Brazilian auto market, namely Fiat, Volkswagen and GM. Fiat in particular looks vulnerable. Unlike GM, Fiat has no significant exposure to the booming US auto market. Unlike VW, Fiat has no significant exposure to the Chinese auto market which, if not booming, is still an important place to be.

Two months ago when I wrote on the Brazil auto market and the ill-advised use of sales-boosting incentives by the Brazilian authorities, I made the following comment:

There’s no doubt that these measures are achieving the short-term aim of lifting sales. What should be worrying you is what happens when subsidies come to an end.

The chart at the top of the page with awful clarity not only the positive impact of the incentives on auto sales but also the negative impact on auto sales when subsidies lose their ability to persuade consumers to buy cars. (The data is from FENABRAVE.) That red line, showing 2012 sales, soars to over 405,000 units in August 2012, which was nearly 100,000 units higher than the previous highest level for August of 307,000 units set in August 2011. Then in September sales came crashing down to 277.6k units, worse than September 2011, September 2010 and September 2009.

Here’s another view of September data, showing the change in September sales relative to August sales from 2003 to 2012. The median change in September from 2003 to 2011 was -1.8% month-on-month, against which September 2012 fell by a chunky 31.5%.

Brazil light vehicle sales, month-on-month % change in September 2003-2012

Indeed, September 2012 wasn’t just a weak month for September; the sequential decline in sales was large compared to any other month. Only three times in the period 2003-2012 have there been larger month-on-month declines in sales than that of September 2012 and all of those came in the seasonally weak month of January: January 2004, January 2005 and January 2011, as shown in the chart below.

Brazil light vehicle sales, month-on-month change in light vehicle sales (%)

Toyota launches the Etios in Brazil

In a recent post on Toyota’s much-improved position in the Indian auto market I reminded you that Toyota planned to launch the Etios in Brazil. The Etios is a very modern car but one designed specifically for emerging markets. In its first month on sale in September 2012 the Etios seems to have sold a total of 485 units for the sedan and the hatchback together. Compared to the 23,351 units of the overall market leading Volkswagen Gol (not Golf) that’s not a great deal. However, the Etios sedan came 9th in the ‘small sedan’ category and the Etios hatchback was 8th in the ‘entry level vehicle’ category. It’s a quiet but respectable start, anyway. We’ll have to wait and see whether Toyota can replicate its Etios success in India in Brazil.

Previous post:

Next post: