Government announces measures to try to make the ‘popular’ car cheaper and heat up industry in the country
The federal government announced this Thursday (25), on Industry Day, measures to try to make the so-called “popular” car cheaper and warm up the country’s industrial sector, affected by the recent economic crises. The actions were announced after a meeting of President Luiz Inácio Lula da Silva and Vice President Geraldo Alckmin, in addition to the economic team, with representatives of entities from the automotive sector at the Planalto Palace. The main measure linked to the automotive industry is an IPI, PIS and Cofins discount for vehicles of up to R$ 120,000. For higher value vehicles, there are no announced changes. The values were not disclosed but, according to Alckmin, “the smaller the car, the more accessible, the greater the discount”. “The stimulus proposal is transitory, countercyclical, for this moment of much idleness in the industry. […] Today, the cheapest car costs almost R$ 70,000”, declared the vice president, who is also the minister of Development, Commerce, Industry and Services. The stimulus package for general industry includes: the adoption of the reference rate (TR ) as an interest rate for research and innovation projects – which should make the industry’s efforts in these areas cheaper; BRL 4 billion from the National Bank for Economic and Sustainable Development (BNDES) for financing in dollars aimed at companies that work with exports – the financing in dollars, according to Alckmin, serves as an exchange rate hedge. starting price of the zero car, not counting the measures announced this Thursday, is around R$ 68,000, more than 50 minimum wages (which is at R$ 1,320.00). The intention to make vehicles cheaper was publicly manifested by President Lula during a speech on May 4th. At the time, he said that a “R$90,000” car is not popular. In recent days, representatives of ministries and the sector discussed possible alternatives to reduce prices. The executives stressed to the government that automakers already have very little profit margin on popular cars and that, therefore, it would be difficult to reduce prices at the factories. The margin, according to the companies, are higher in more expensive cars. Representative of the automobile industry This Wednesday (24), the president of Stellantis, Antonio Filosa, met with the Minister of Finance, Fernando Haddad, and stated, after the meeting, that the automobile sector is clearly suffering from high interest rates. The company controls Fiat, Jeep and Citroen, among others, with a 33% share in the domestic market. Currently, the economy’s basic interest rate, set by the Central Bank to try to contain inflation, is at 13.75% per year, the highest level in six and a half years. The interest charged on car financing, however, is higher. According to the BC, the average rate of banks on this credit line was 28.6% per annum in March. “Interest is difficult to resolve from one day to the next. But it is possible to think of credit access mechanisms that could facilitate it. For example, improving the level of real guarantees, for example using some assets that the government has, and so forward,” said the Stellantis executive on Wednesday. Questioned by journalists, he also assessed that “some kind of tax exemption is always welcome”. “A tax break would make the car cheaper. Clearly, there is a sacrifice automakers must make to generate more efficiencies,” he said. Filosa also said that the price of steel has risen a lot in recent years, impacting the cost of automakers.