Are popular cars coming back? Understand in 7 points – 05/15/2023 – Market

The government is preparing for ten days from now, on May 25, the announcement of a package to resume the production of popular cars in Brazil. The date was chosen because it celebrates Industry Day.

Details are still being fine-tuned, but the Sheet found out that the objective is to launch an incentive plan for the entire industrial chain. The scope, therefore, will go beyond the scope of the automakers. The measures will include credit lines for the manufacturing sector, tax reductions, an increase in the nationalization index of manufactured goods and a vehicle financing program.

See here the main points of the package that will be announced

1. Models must cost up to BRL 60 thousand

The focus of the measures will be on entry cars, which should not undergo major changes at this time. The objective is to reduce the initial prices of compact models with 1.0 engine to a range between R$ 50,000 and R$ 60,000.

2. Idea of ​​a popular car powered only by ethanol should fall

One of the points defended by the government at the beginning of the negotiations must be changed: the linking of benefits to cars powered 100% by ethanol.

In addition to worrying about market acceptance, automakers claim that flex-fuel cars can now only run on alcohol. Any other change would require new investments, which are not in the plans of the companies. Part of what was spent in recent years on the evolution of models is still being amortized in the country, and manufacturers do not intend to dedicate an exclusive cycle of contributions to producing cars considered less profitable.

3. Renault car could be the first to be launched in the program

The cheapest car sold today in Brazil is the Renault Kwid in the Zen version, which costs R$ 69 thousand and is produced in São José dos Pinhais (PR). Representatives of the French automaker met with the Minister of Development and Vice President, Geraldo Alckmin (PSB), last week.

The Kwid is likely to be the first model to qualify for the incentive program. Today all versions of the compact are equipped with power steering and air conditioning, but this was not always the case. At the launch of the car in June 2017, the Life option did not have these items. At the time, the price started at R$ 30,000 – a value that, corrected based on the IPCA, is equivalent to approximately R$ 41,000 today.

4. Other models may see a price reduction if they become greener

For brands that do not offer low-cost models and do not intend to simplify their cars, the expectation is to convince the government that the most important thing is to create ways to reduce the prices of existing cars, changing taxation and removing as little equipment as possible. .

This idea should be included in the government’s plan, which will not be limited to entry-level models. In this way, there will be a reduction in prices and long-term financing, but without the obligation to reach a value below R$ 60 thousand in order to have access to tax benefits.

In this case, one of the criteria used could be energy efficiency, which will benefit less polluting models. The package should include incentives for the local production of hybrid and electric cars, something that is of interest to automakers.

5. FGTS as collateral is an option to lower credit

This whole package, however, comes up against the problem of the average Brazilian income, which has been even more flattened due to the combination of the economic crisis and the pandemic. The perfect storm is complemented by the current level of the basic interest rate and by a persistent increase in defaults.

According to Anef (National Association of Financial Companies of Automakers), late payments for more than 90 days reached 5.9% of contracts, which represents an increase of 1.5% compared to 2021.

This is the challenge of the financial sector: offering attractive rates to individuals without implying credit risks. One of the ideas to get around the problem is to use the FGTS as a guarantee.

In this way, the money would not be effectively used to purchase the car, but could be accessed by the banks in case of default. The topic is still under discussion, and it is not known whether it will be part of the incentive package.

6. App drivers can be the main users of the popular car

All measures are aimed at boosting retail sales, but the low-end cars are likely to end up in rental car fleets. These models would be in demand, for example, by application drivers who adhere to long-term subscription programs.

160.7 thousand units were registered in the last month, and rental companies were the main customers. Companies in the sector bought 47,000 vehicles in May.

7. Government and companies hope to increase employment

The side effect of the strategy is idle assembly lines. The industrial park has the capacity to produce around 4.5 million cars per year. 2.37 million units were manufactured in 2022, a number that includes passenger cars, light commercial vehicles, buses and trucks.

A sign was the announcement made by Volkswagen that it decided to postpone the implementation of the layoff system (temporary suspension of employment contracts) for 800 employees at the Taubaté plant (interior of São Paulo), previously scheduled to start in June.

This unit produces the Polo Track (R$ 81,370), a model that replaced the Gol as the German brand’s entry-level car in Brazil. With the withdrawal, the vehicle will continue to be produced in two shifts, which indicates a desire to increase the stock.