In 2007, nearly three million automotive vehicles were manufactured in Brazil, making the country the seventhlargest automobile manufacturing country in the world by volume. That same year, the industry represented 5.4 per cent of Brazil’s gross internal product, up from 4.9 per cent in 2006. The Brazilian automotive sector has grown rapidly over the past three years and industry estimates put the growth rate for 2008 at 20 per cent. Clearly, the industry’s role in the Brazilian economy is a large and growing one.
A sizeable proportion of this output is exported to external markets – approximately 25 per cent of the automobiles produced in 2007 were exported. Of the 789,399 vehicles exported in 2007, 56.5 per cent went to other South American countries, 17.4 per cent to North American countries, 12.5 per cent to African countries, 9.1 per cent to European countries, 3.2 per cent to Asian countries and 1.1 per cent to Central American countries. Argentina, Venezuela, Mexico and South Africa are the main importers of vehicles manufactured in Brazil.
The growth of the automobile industry in Brazil has been underpinned by a large and expanding domestic market and favourable economic and regulatory environments. Government-sponsored infrastructure projects have improved connectivity between rural and urban areas, and road conditions generally, increasing the appeal of automobile transportation to the domestic consumer. Over the past few years, the Brazilian auto industry has received more tax rebates than any other domestic industry and has been allocated over half of the R$6.1bn tax rebates set aside to promote industrial growth until 2011. In early 2008, the industry also benefited from government financing and tax incentives allowing for the accelerated depreciation of machines and equipment. Brazilian law does not restrict foreign investment in the automobile manufacturing market; foreign investors can own unlimited equity interests in a domestic car manufacturer and establish businesses in Brazil without having to take on a local partner.
This favourable environment has attracted manufacturers from Europe, the US, Japan and South Korea. The Brazilian automobile sector is dominated by international corporations: Fiat, Ford, General Motors, Honda, Mercedes-Benz, Mitsubishi Motors, Nissan, PSA Peugeot, Citroën, Renault, Scania, Toyota, Volkswagen and Volvo are all active in Brazil.
Manufacture of automotive components
The automotive components industry has experienced steady growth in Brazil over the past decade and has attracted large-scale foreign investment. Foreign capital invested in the industry has leapt from approximately 48 per cent of the total investment in 1997 to around 80 per cent in 2007, with the largest inflows of capital coming from Germany and the US. Automobile manufacturers represent over two-thirds of the demand for automotive parts in Brazil.
There are no independent dealerships selling new cars in Brazil. Authorised concessionaires are responsible for distribution. Law No. 6729/79 governs the relationship between manufacturers and dealers and allows manufacturers to prohibit dealers from selling new automobiles supplied by competing manufacturers. However, this prohibition does not extend to used cars – dealers are at liberty to sell used cars from any manufacturer. Insurance and registration services for new and used automobiles are generally offered at dealerships by third parties, but dealerships have no legal obligation to offer such services. Brazil does not impose any restrictions or limits on foreign investment in domestic car dealerships.
Regulation governing imports
Importing new automobiles into Brazil is a restricted activity, requiring import licences and certificates issued by environmental and traffic governmental agencies. Restrictions on importing used cars into Brazil are even more onerous and have the effect of limiting such imports to vintage cars (manufactured over 30 years ago), cars that have been inherited abroad and cars to be used by diplomatic representatives. Furthermore, importing used automobile components is prohibited.