Popular car: Government will announce plan in May – 05/13/2023 – Market

The resumption of the automotive sector through popular cars has become one of the main goals of the MDIC (Ministry of Development, Industry, Commerce and Services). The first stage of this process will be announced on May 25, the date that 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 announcement must be made at the headquarters of Fiesp (Federation of Industries of the State of São Paulo). 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.

In the case of the automotive sector, conversations take place directly between automakers and the government, without interference from Anfavea (association of manufacturers). According to Márcio de Lima Leite, president of the entity, there are compliance issues involved, and therefore each manufacturer must make its own decision.

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.

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.

“I received Renault’s board of directors to discuss proposals that strengthen the automotive sector. President Lula is committed to resuming the vigor of our automobile industry, which is a great employer”, said Alckmin in a post on his social networks.

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.

Inflation in the automotive sector, however, reached higher levels in recent years. In addition to cars evolving to meet stricter safety and emission control standards, the economic crisis and the pandemic made companies bet on more profitable vehicles. In this scenario, compacts with higher sales volume, but not very profitable, were left aside.

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.

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. .

“The plucked car, without content, does not go against what the Brazilian wants”, Santiago Chamorro, president of GM South America, tells Folha. The automaker has repositioned its products in recent years, including more technology and safety items even in the compact Onix (from BRL 84,400).

“In our opinion, contrary to making investments to create a popular vehicle with conditions that the customer does not want, we should give this consumer the possibility of, within the existing portfolio, having a vehicle with better access conditions.”

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.

One of the signs of this process is the exclusion of the expression “popular car” from public statements by representatives of the government and automakers.

Another sign: Volkswagen postponed the implementation of the layoff system (temporary suspension of employment contracts) for 800 employees at the Taubaté plant (interior 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.

However, 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. As they are multinationals, companies in the sector are focused on the global electrification process.

But it is possible that the package to be presented by the government will include incentives for the local production of hybrid and electric cars, something that is of interest to automakers.

In April, Toyota announced an investment of BRL 1.7 billion to produce a new compact SUV in Brazil, which will run on gasoline, ethanol and electricity.

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.

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.