GWM: Investing in Brazil is making plan A, B and C, – 04/23/2023 – Market

The floor occupied by GMW in a building in the south of São Paulo has a ping-pong table, vending machines and free coffee. It’s no different from many other companies in the area, but these amenities appeal to Chinese employees.

The automaker is adapting to the ways of Brazil, and this work involves tropicalizing the offices. Oswaldo Ramos, the company’s CCO (head of the commercial area), talks about this transformation and the manufacturer’s expectations in the domestic market, in which it is investing BRL 10 billion.

After launching the imported Haval line, GWM is preparing to start production in Iracemápolis (inland São Paulo), in the unit that once belonged to Mercedes-Benz.

Brazil has had some car factories closed in recent years, including the one acquired by GWM in Iracemápolis. In this scenario, why did the Chinese automaker decide to produce vehicles in the country?

Brazil, regardless of the economic moment, if it has a stronger GDP growth, it will be in the top 10 worldwide. And if not, it will stay there. The country will always have a relevant market.

The company will produce flex hybrids. Do you also intend to launch hybrid models that combine only electricity and ethanol?

Technically, the flex hybrid is also a 100% ethanol hybrid car. The technology is even simpler if the rest of the gasoline software is removed. There are no obstacles, and if that’s the rule of the game, we’re ready. But it is important to define this rule.

What do we want for society? What do we want in sustainability? It’s no use making laboratory rules and not being exactly what the consumer wants.

We know that most flex-fuel cars only run on gasoline, and today there isn’t even enough ethanol production if everyone turns the key overnight. It takes planning, strategy.

And how does the automaker see this technology?

Medium-term planning is needed to increase ethanol production and replace gasoline in the entire fleet. It is an account to be made, much more complex than just the car. There is a whole ecosystem.

But we are innovating, bringing a product to Brazil that is primarily electric, the plug-in hybrid [que pode ser recarregado na tomada] with a battery that allows you to run 170 km in electric mode.

For most people, 80% of usage is in this electric mode. If necessary, you can use the combustion engine. In terms of technology, there are many advantages for the consumer and the environment.

But isn’t the plug-in hybrid a very expensive project because of the fact that it has a much larger battery, in addition to the two motors?

Undoubtedly there is a cost, which depends on the scale.

And the scale depends on what?

If we choose that this is a technological option for Brazil, good for 80% of consumers, we concentrate investment in the direction of the plug-in hybrid —which can be flex or ethanol, depending on the country’s energy guideline— and we achieve scale, it is possible to make possible.

It’s cheaper sometimes to make a plug-in hybrid with a good battery than it is to make a 100% electric car with an even bigger battery. Or, on the other hand, trying to make the combustion engine viable, either with synthetic fuel or with other solutions.

We see that, for Brazil’s energy matrix, the flex hybrid is a great solution, looking at consumer demand.

What is the role of ethanol?

If we analyze the entire ecosystem, from production to our interest in the environment, without a doubt ethanol can have an even greater space.

The new technology, electrification, does not come to replace flex fuel or ethanol. Brazil has room to be a protagonist in these new energy sources.

Biofuel combined with a plug-in hybrid system is an exceptional solution, cheaper and more viable than the 100% electric car, and does not require such infrastructure.

GWM has already announced the national production of the Proer pickup. At the same time, there is discussion about resuming the collection of tax on electric and hybrid imports. Are there any concerns about this topic?

Investing in Brazil means having plan A, plan B and plan C, we have to work with all scenarios, and we are ready for any one.

We would have much more investment, much more technology and many more options if we had clear medium and long term planning, predictability. Who ends up paying this bill is the consumer market.

If you define the rules of the game, we are going to invest in Brazil, we are going to have ten cars in three years here.

The exemption that exists in the Import Tax is linked to the fact that there is no similar national car. When there is, it will be natural to have this control, this customs barrier.

Complementation will always occur in segments that are more niche, on a smaller scale. These will be imported.

Regarding exports, how does GWM see the possibilities? Does the company only think about the Latin American market or does it have ambitions of sending domestic cars to Europe and Africa, for example?

Brazil really is a platform for Latin America and we even have an interesting demand, which could move to Central America. But the country can be a protagonist in new energies, and our long-term vision goes far beyond the products we are going to launch next year.

The hybrid is more efficient if it is flex. We have this technology, we can develop software in Brazil, we have specialized companies, we have engineering, we have what to export.

The 100% electric car, on the other hand, involves the energy sources that Brazil is working on, whether wind or photovoltaic. That is, the country also plays a leading role in the electric car.

Looking at the long term, Brazil can indeed be a hub not only for the production of green hydrogen, but for the production of vehicles powered by this fuel.

Why?

Brazil is a country where most goods are transported by road, we don’t have railroads here. This absence is filled with trucks, which is where the hydrogen ecosystem pays for itself first, because the weight of the battery is eliminated. [de um caminhão elétrico].

We have FTXT within our holding company, which already has truck routes in the headquarters using hydrogen. Brazil has to look at the long term, have a strategy and see what our role is to be protagonists.

Does the company plan on also operating in the heavy vehicle segment in the Brazilian market?

Today GWM supplies the hydrogen cells [para caminhões] and its reactors for three partner assemblers. In other words, we are both suppliers and manufacturers in the future.

On the return of popular cars: is GWM interested in entering this segment in the domestic market?

From the beginning, the DNA of the brands that make up GWM are SUVs and pickup trucks, and we will be faithful to that. It is our expertise, we will continue this project.

If there is room for other viable niches in Brazil, we will be able to analyze them. But today’s plan is continuity in pickup trucks and SUVs.

What has the Brazilian team been doing to explain to the Chinese about the rule changes taking place in Brazil?

I’ve worked in the auto industry for three decades, dealing with many different cultures. GWM has an extremely curious culture, asking and wanting to understand.

In most cultures, what’s good at the parent company has to be good at the subsidiary, and you don’t have as much voice as Brazil does. But here the exact opposite is happening.

We made a car from Brazilians to Brazilians, using the best technology we had back at headquarters. I’m a firm believer that when you do market-oriented things, success is the destination.

But all this discussion exists, the Chinese ask a lot and, as I said, it is necessary to invest extra time in Brazil and make plan A, plan B and plan C, because the scenarios can change.

It’s a big job to explain that the country has short-term changes. At this moment in which we have a very recent government, a window opens again.

I am not saying that there was no conversation with the previous government, I am saying that the industrial area apparently has better dialogue now.

It seems that GWM has been talking a lot with Brasilia.

The reindustrialization of Brazil is a collective effort. This is independent of the political moment and the economic cycle. We bought the Mercedes factory in the previous cycle, we made the investment decision independently of the government.

It is very good, yes, to have an interlocution. Long before saying “let’s stop imports”, saying “how are we going to make local production viable?”.

There is a revolution happening out there, and Brazil is watching from afar. We need to bring these new technologies, and it is not with old solutions that the country will gain scale. There’s no use going back to the past.

Will it be that in ten years we will see Chinese automakers in the top 5 of the best selling brands in Brazil?

Regardless of nationality, we see that those who look at the market, who look at the consumer, will survive.

If, as has sometimes happened in the past, the Chinese try to arrive by taking advantage of the Import Tax, a favorable exchange rate or surplus production, this will not work.

And it doesn’t work for Chinese, it doesn’t work for Americans, it doesn’t work for Europeans. If someone tries to push the technology left over from the matrix here, it won’t hold up.

And when will GWM’s national 100% electric car arrive?

100% electric is still a niche, and there is no scale to produce in Brazil. It’s that discussion we had earlier.

That’s why imports come first, to create the market and infrastructure. When that happens, there will be scale to produce in Brazil.

The point is: we understand that the flex hybrid is very good for those who drive long distances without access to a charger. The plug-in hybrid, on the other hand, is excellent for day to day in the city and, on the weekend, allows you to make longer journeys. It is flexible for both environments.

At the other end we have the 100% electric car, ideal for those who only drive in the city. But it’s the trend, it will happen.

This niche will become a segment, which is why it is important that we start offering these products with a long-term vision. Nationalization is a question of scale, of volume.

X-ray

Oswaldo Ramos, 56 Head of the commercial area at the Chinese automaker GWM, he worked for over 30 years at Ford and had a stint at Peugeot. He holds a degree in production engineering from the Polytechnic School of USP (University of São Paulo).