Popular car: know the history – 05/25/2023 – Market
The incentive plan for the production and sale of automobiles adds little new to an agenda already adopted in the past.
Elements of the policy established in the governments of Fernando Collor de Mello and Itamar Franco are added to decisions taken in the past terms of Luiz Inácio Lula da Silva and Dilma Rousseff. If there is any subsidy for financing, there will be parallels even with the project adopted in 1964. However, automobiles and the market have changed, as well as the desires of consumers.
Histories are similar. In December 1988, times of hyperinflation, new cars accumulated an increase of 1,839.5% in 12 months. In the same period, the country’s official index was 933.6%. Buying a zero-kilometer car was a distant dream, something that happens again now. Falling sales and risk of layoffs were the frequent arguments of automakers.
On June 27, 1990, decree number 99,349 was published, which reduced to 20% the IPI (Tax on Industrialized Products) on cars with engines of up to 1,000 cm³. Before, the rate ranged from 37% to 42% – with the exception of the 5% charged for a very specific niche, in which the only model that fit was the Gurgel BR800.
In addition to “killing” Gurgel’s cart – which was included in the new tax range and lost competitiveness–, the measure forced automakers to invest in “one thousand” engines, which were out of the market. Only fiat had an option on the shelf. There was a 994 cm³ engine in production, an old design that had been adapted for the export-type Uno.
The automaker was already eyeing the new rule, whose terms were known well before Collor signed the decree. So Uno Mille was born, which premiered in August 1990. Its price corrected by the IPCA would be R$ 51.3 thousand. It was the first step towards what became popular cars.
Despite the reduction in prices, the segment was still in crisis. The growth was only seen in a small niche, in which were the imported models that returned to the market. National production continued to be retracted in the midst of political and economic crises, and prices were again high.
After Collor’s impeachment process –which ended with his resignation–, Itamar Franco took over the government with the need to revive the economy and occupy industry. Possession took place in December 1992. In April 1993, the IPI was again reduced, and models with a 1.0 engine started to have a symbolic rate of 0.1%.
In March 1993, the Uno Mille cost the equivalent of R$71,000 in its simplest version. In May of that year, the amount had dropped to approximately R$51,000.
The comings and goings of prices, the complaints from automakers and specific tax incentives were repeated in the following years and are happening again now. Cars, however, are very different, as are the requirements of laws and consumers.
The main candidates to be popular in the 21st century are projects of Asian origin, but developed together with Brazil. Renault Kwid and Citroën C3 emerged in India, a market that also needs low-cost models.
These are cars that were born after changes in safety rules in the domestic market. Since January 2014, all new models sold in the country have front airbags and ABS brakes (which prevents the wheels from locking in emergency situations).
In addition, they are equipped with the most desired items by the consumer market. Today all versions feature air conditioning, power steering and electric drive for front windows and door locks.
More affordable, the Kwid costs from BRL 68,990. In April, shortly before talks about tax reduction took shape, the car was sold for promotional prices, between R$61,000 and R$64,000. But without giving up the factory equipment.
Discounts occur whenever stock is available at the same time it is time to change year/model. There were 2022/2023 units in stores, but 2023/2023 units were already in production. And it’s better to give a retail discount than to give up a much higher percentage of profit when selling these cars to rental companies.
With tax incentives, the price charged in stores will fall to less than R$60,000, as the government wants. Perhaps there will be the withdrawal of one or another component or the simplification of internal and external finishes, but without losing safety items. And if versions without air conditioning appear, they will probably be passed on to fleet owners.
Nothing that looks like the 1993 Uno Mille, which didn’t even have a right side mirror. Air vents were central only, with no cooling or heating. The gearbox only had four gears.
Although the evolution of products shows that it will be difficult to reach around R$50,000 –the historic level of popular cars in values corrected by the IPCA– it is also necessary to consider the progress in design and production methods, which reduce development costs, and the gain of scale provided by an eventual increase in sales.
The calculation is not only based on what can be removed from cars to reduce prices, but considers how adaptable the project is to new regulations. That’s why models made for lower middle-income regions come out ahead in the “popularization” process.
Now the main advance will be taxation for energy efficiency. If well designed, it could boost electrification and accelerate the arrival of hybrid ethanol models. It will also be an impetus for more expensive models that adopt less polluting technologies.