Popular car: Automakers skate and wait for program – 02/06/2023 – Market

High interest rates, weakened purchasing power and factory shutdowns. According to analysts, these factors largely explain the recent performance of the automotive industry in the country.

In April, the national production of motor vehicles, trailers and bodies dropped 4.6% compared to March, according to data released this Friday (2nd) by the IBGE (Brazilian Institute of Geography and Statistics).

According to the agency, the activity was one of the main factors responsible for the downturn in industry production as a whole in the same period (-0.6%), alongside food products (-3.2%) and machinery and equipment ( -9.9%).

In the case of vehicles, the drop came after two months of stagnation. The variation was null (0%) in February and March. “Automobiles and trucks, which are the items with the greatest weight in the activity, had a drop in production [em abril]”, said André Macedo, manager of the IBGE survey.

The weakness occurs in the midst of the sector’s expectation for the advancement of the Luiz Inácio Lula da Silva (PT) government program to lower the prices of popular cars.

In the view of Antônio Jorge Martins, coordinator of automotive courses at FGV (Fundação Getulio Vargas), the project tends to increase sales if it gets off the ground, but it should not solve all the problems that slow down the sector.

The professor estimates that automobile production costs have increased by around 55% after the impacts of the pandemic, which paralyzed factories due to the shortage of inputs such as semiconductors.

Meanwhile, the government’s project provides for a reduction of up to 10.96% in the prices of popular cars from the tax reduction, according to information released last week.

“This measure, in isolation, does not reverse the sector’s crisis. The increase in costs was 55%, and the reduction in prices is up to 10%, 11%”, says Martins.

“Will there be movement in sales? Of course. A sign of this is that many consumers are no longer buying now [para esperar o programa]but it does not solve the crisis as a whole”, he adds.

The manager of economic studies at Firjan (Federation of Industries of the State of Rio de Janeiro), Jonathas Goulart, follows the same line.

He says the project “has merits” but is more short-term oriented and unlikely to increase productivity over a longer period.

“The automotive sector depends a lot on credit conditions and the population’s purchasing power. We understand that this can be resolved more with a broad tax reform”, he assesses.

Economist Rafael Cagnin, from Iedi (Institute of Studies for Industrial Development), says that the government’s project for popular cars should be interpreted as an anti-cyclical measure, that is, one that seeks to stimulate sales in the midst of a period of difficulties.

The program, however, cannot be confused with an industrial policy, which would have the objective of transforming the productive structure towards modernization and productivity gains, says Cagnin.

For the economist, it is possible that the package will not cause “very profound effects”, since consumption in the country has been impacted by factors such as high interest rates and debt.

“Within durable goods, vehicles are among the items with the highest unit value. It is a market that depends on financing. We have a block there”, he says.

Cagnin adds that, if the package takes time to come into force, it can generate an effect contrary to what was intended in the short term, because consumers tend to wait for confirmation of discounts, postponing business.

Concessionaires demand government haste

This Friday, Fenabrave, which represents dealerships, said that the average daily sale of cars and light commercial vehicles has been falling in the country. It went from 8,420 units in April to 7,560 in May, totaling 166,361 registrations.

“With this result, the month of May, excluding the year 2020, when we were experiencing the height of the pandemic and many dealerships had only their workshops open, became the worst since 2016, for these segments”, said the president in a note. from Fenabrave, José Maurício Andreta Júnior.

He also called for urgency in implementing the measures promised by the government. The business leader said he has been receiving calls from affiliates claiming a stoppage in sales, with consumers waiting for the project.

Commenting on the industrial production data for April, André Macedo, from the IBGE, assessed that the performance of the vehicle industry reflects the restrictive impacts of high interest rates.

According to the researcher, high default rates and household indebtedness also affect the branch.

Macedo also mentioned the sector’s difficulty in obtaining electronic components, accompanied by the record of stoppages, reductions in working hours and collective vacations in factories.

Production almost 20% below pre-pandemic levels

According to the IBGE, the production of vehicles, trailers and bodies accumulates a drop of 3.5% in the year (until April) and an increase of 4.3% in 12 months.

The segment is 19.7% below the pre-pandemic level of February 2020. Industry production as a whole is 2% below, according to the institute.

Consulted by the report, Anfavea (National Association of Motor Vehicle Manufacturers) did not comment on the data published by the IBGE.

According to a balance released in May by the entity, the national production of vehicles accounted for 178.9 thousand units in April. The number represented a drop of 19.4% compared to March.

Anfavea attributed the result to factory stoppages. Of the 13 recorded in the year, 9 occurred in April.

For the industry as a whole, analysts project a lukewarm year in terms of production. The assessment is that the effects of interest rates and the prospect of a slowdown in economic activity play against a firmer performance.

“The year 2023 is one of adjustment. The materialization of the fiscal targets is important to signal the direction of the government’s policies. The industry is suffering the effect of the interest rate, and we expect a very timid growth”, says Jonathas Goulart, from Firjan.

Any reduction in the basic interest rate (Selic) in the second half of the year should only be felt more intensely by the sector from 2024 onwards, predicts Rafael Cagnin, from Iedi. “This year should be more of the same.”