Brazilian auto sector shows ascension due to strong exports

Brazilian auto sector shows ascension due to strong exports

Brazil's national automakers association Anfavea said that the vehicle production in Brazil rose to its highest level in January-September period on the back of strong rise in exports and a slight increase in domestic sales. It is reported that the growth in the domestic market is still slow, but exports, which affected output, maintain its strong level. Brazil's auto production rose by 22% from a year earlier in the first nine months to 1.63 million cars and light trucks. The only other time output came close to that level was 1997, when local automakers were busily investing more than $25 billion to increase capacity to 3.2 million vehicles a year. Since then, output and sales have showed a downward trend because of macro-economic shocks. Brazil's auto industry may ride out this slump this year by selling further cars overseas. Domestic sales will help this situation as well. In the first nine months of the year, sales reached 1.13 million units, up by 14% compared to the same period of last year. In addition, rising exports can help the auto industry reach the 2.1 billion vehicle annual output target that Anfavea forecasts this year. Brazilian automakers are mainly exporting vehicles to the US, Mexico, Europe and mostly to Argentina. Last month, Argentina imported 21.2% of all Brazilian auto exports. Total overseas sales decreased by 9.1% in September compared to August. This decline is attributed to the string of hurricanes, which prevented shipments to the US. Overseas sales soared by 50% from a year earlier in the first nine months of the year to $5.9 billion. Exports started to show an upward trend last year as automakers focused on overseas markets to revive the languishing sales in Brazil. Despite the upturn in the auto sector, high interest rates may discourage consumers from financing purchases. The other factor that affected the auto sector negatively is the rise steel prices. Strong demand from China has boosted global prices, creating a pressure on prices in Brazil. Steelmakers have opposed automakers to raise prices by 10-15% in October.