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Brazil may pass Germany to become global No. 4 auto market

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Brazil may pass Germany to become global No. 4 auto market

Bloomberg News

Automotive News Europe -- April 13, 2010 08:33 CET

SAO PAULO (Bloomberg) -- Brazil may pass Germany this year to become the world's fourth-largest auto market after banks cut interest rates and eased loan terms, putting purchases in reach for more consumers.

Wider access to credit in South America's biggest economy expanded the pool of potential buyers by more than 50 percent, said Guido Vildozo, an IHS Global Insight Inc. analyst.

IHS and researcher J.D. Power & Associates both forecast Brazil eclipsing Germany in 2010.

“Brazil is an emerging market, coming of age, and Germany is more of a mature market,” said Jeff Schuster, J.D. Power's executive director of forecasting.

Brazil had been an independent country for only 64 years when German inventor Karl Benz got a patent for his first car in 1886.

Germany began the last decade as No. 3 in sales after the U.S. and Japan before being passed by China, which now holds the top spot.

Vehicle sales in Brazil totaled 3.1 million in 2009, compared with 4 million for Germany, according to J.D. Power. This year, Brazil will rise to 3.4 million and Germany will drop back to 3 million. Brazil's population is about 206 million, compared with Germany's 82 million.

Germany's projected sales decline follows the end of a 2,500 euro ($3,398) incentive for new-car buyers trading in older vehicles. The government approved the payments in January 2009 to help stem a market slump dating from August 2008.

‘Overheated' Germany

“In terms of Germany, they overheated last year and now they're paying the price,” said Schuster, who is based in Troy, Michigan.

Germany may retake the fourth spot from Brazil next year, as demand stabilizes after the so-called clunkers payments, according to IHS, which predicts Germany will permanently fall behind Brazil in 2015. J.D. Power projects Brazil staying in fourth place after 2010.

Brazilian sales of passenger cars and light commercial vehicles jumped 28 percent in March to 274,487, an industry group said last week. Volkswagen AG, Europe's biggest automaker, led the market, followed by Fiat S.p.A. and General Motors Co.

“The improvement in Brazil is about the opening up of credit,” said Vildozo, who is based in Lexington, Massachusetts, and follows the Brazilian market for IHS.

Two years ago, auto loans carried interest rates of about 37 percent and spanned only 36 months, Vildozo said. Now, rates have fallen to about 25 percent and borrowing can be stretched to more than 80 months, he said. That means 16 percent of Brazilians can afford a new car, from 10 percent, he said.

Brazil's recovery

Record low interest rates and tax cuts helped pull Brazil out of recession last year. The economy may expand 6.4 percent in 2010, the fastest pace in more than two decades, according to estimates by Paulo Leme, chief Latin America economist at Goldman Sachs Group Inc.

Investments by domestic and overseas automakers in the country are picking up, too, with spending of 23 billion reais ($13.1 billion) planned from this year through 2013, according to a Web site statement last month from Brazil's state development bank. That compares with 15 billion reais from 2005 through 2008.

“The industry is a fast-growing market in Brazil, the investments are setting record after record,” Alexandre Andrade, an economist at consultant Tendencias Consultoria, said in an interview. “No global brand can take the risk to be out of this domestic market.”

Sao Paulo-Detroit flights

Brazil's importance as an automotive center helped persuade Delta Air Lines Inc., the world's largest carrier, to add direct flights between Detroit and Sao Paulo starting in November. Detroit was a hub for Northwest Airlines Corp., which Atlanta- based Delta acquired in 2008.

“Automakers have been very supportive of our international expansion,” said Andrea Fischer Newman, Delta senior vice president of government affairs. The airline plans to operate twice-weekly flights with a Boeing Co. 767 widebody jet, and applied for regulatory approval for daily service.

Ford Motor Co., No. 4 in sales last month, is investing $3 billion in South America through 2015. Spending in Brazil will rise 500 million more reais than planned, to 4.5 billion reais, from 2011 through 2015, CEO Alan Mulally said last week in Brasilia.

Last month, PSA/Peugeot-Citroen CEO Philippe Varin said Europe's second-largest carmaker will spend 1.4 billion reais over the next three years in Brazil. Hyundai Motor Co., South Korea's largest automaker, said in September it will begin building a plant in Brazil this year after suspending the plan due to the global recession.

Vehicle production jumped 9.4 percent in March from a year earlier to 330,980, and exports surged 67 percent to 57,929, the National Vehicle Manufacturers Association reported last week.

“Brazil's economy is shifting from recovery to growth rather quickly,” J.D. Power's Schuster said.

Read more: http://www.autonews.com/article/20100413/ANE/100419974/1193#ixzz0l0Lz1RjS

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I know that Brazil is of great importance to GM since they are growing so fast. They have in the past been given a larger role in their styling studios. I haven't herd anything since the bankruptcy, has anyone else?

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