Post-pandemic, credit and industry euphoria: Volkswagen CEO speaks to g1 about new wave of investments

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Ciro Possobom analyzed the economic scenario that motivated the automaker to announce R$16 billion in its factories in Brazil by 2028. The Brazilian automotive market is going through a historic investment cycle. Automakers operating in the country recently announced contributions that, together, reach R$117 billion, according to data compiled by the National Association of Motor Vehicle Manufacturers (Anfavea). The amount represents a record for the sector. Among the new announcements is Volkswagen’s plan to invest R$16 billion in its four factories in Brazil by 2028. The new R$9 billion is in addition to the R$7 billion announced in 2021 by the automaker. The total amount provides for the manufacture of 16 new vehicles, including hybrid, 100% electric and full flex models, in addition to “innovative projects” and a “focus on decarbonization”. The automaker also announced that it will produce four new vehicles — including a pickup truck. As g1 showed, the positive scenario for the industry occurs in a context of improving credit prospects, given the cycle of declines in the Selic, the Brazilian basic interest rate. This is a crucial factor for the sector, which is highly dependent on financing. To analyze the scenario and comment on Volkswagen’s new investments, g1 was received by the company’s CEO, Ciro Possobom. In the executive’s analysis, the new wave of contributions is mainly a consequence of a more positive scenario after the Covid-19 pandemic and after the peak shortage of semiconductors — fundamental equipment for the automotive industry. “When the supply chain starts to reestablish what it was before 2019, we may actually have more strength to announce these investment plans. That’s why many automakers are announcing during this period,” he says. Podemosbom highlights that this is a time when the automotive sector is transforming from a combustion industry to a more electrified one, with hybrid and 100% electric cars. “It’s also time for Volks to announce this work”, says the automaker’s CEO, who sees the production of hybrid models as the big news in the company’s investment cycle until 2028. The amount announced by the company (R$ 16 billion) is the second highest in the new investment cycle, behind only Stellantis (R$30 billion). See the main points of the interview with the CEO of Volkswagen: g1 – What revived Volkswagen here in Brazil? Automakers have cycles. We had the first cycle of R$7 billion in investments, with the launch of several cars. And we also said: ‘We need to do more’. Now, at a time when the automotive industry is transforming from a 100% combustion industry to a slightly more electrified industry — with hybrids and electrics — it is time for Volks to also announce this work. g1 – So, was it a movement already foreseen? We are in a period right after the pandemic, which greatly held back investments — not only in our sector, but in several others. Then there was the whole semiconductor situation. This also held back investment decisions. Once this balances out, when this entire supply chain starts to reestablish what it was before 2019, we can really be stronger now and announce these investment plans. g1 – And how did the prospects for the country’s economy and the sector influence contributions? The market [automotivo] Brazilian rate is still a little low, but it has been growing every year. And there is a very strong idle capacity in the sector as a whole. (…) Last year, for example, Volks advanced almost 30% in sales volume. This makes us believe in this investment more. Furthermore, the scenario of falling interest rates should help, with an impact on credit for individuals. And it contributes not only to the sale of cars, but also other consumer goods. CEO of Volkswagen in Brazil, Ciro Possobom poses for a photo at the automaker’s factory in São Bernardo do Campo (SP). Celso Tavares/g1 g1 – Was the Mover program also decisive? The important thing about Mover is that it gives car manufacturers direction. The program works by reducing some taxes for electric and hybrid vehicles and penalizes the model that runs only on gasoline — paying more tax than a 100% flex car. So, the government is saying that flex and electrified have tax advantages. This helps us. Now, we are working with the government on the regulatory process, as great care must be taken to ensure that Mover does not create a superstructure that makes cars more expensive. g1 – What about the increase in tax for importing electric vehicles? Conditions must be the same for all automakers. It would be much easier to bring a car imported from China or Germany than to develop the region. (…) If you allow all imported cars to enter easily, you do not develop an entire supply chain to develop the industry. Then, the arrival of new competitors [no país] and our initiative to invest R$16 billion means that we really develop this entire chain here — which also helps to make cars more accessible. g1 – What is the main focus of Volkswagen’s new investments? Today, in Brazil, 85% of cars are flex fuel and 95.5% are combustion. So, only 4.5% of the market are electrified cars — models that are growing. In this scenario, of the 16 vehicles we will produce, we will have flex-fuel cars, hybrids — focusing on technology developed by Volkswagen — and also electric ones. g1 – How are combustion vehicles? As a new technology, we are producing hybrids. But we also cannot leave combustion cars behind, as this is a large part of the market. We are not a niche automaker. We are an automaker for everyone. And if you add technology, this car has a higher price. So, you have to be very careful not to price the car too much. g1 – Still on electric cars: how does Volkswagen see the arrival of the Chinese BYD and GWM in the Brazilian market? Competition. Some automakers have left, others are arriving. It’s part of the business. We are happy that they are coming here, setting up factories, helping to develop the country and the supply chain. This helps the sector as a whole. I say: ‘Do you want to sell here? So come here, come produce in Brazil’. This helps with the process. In this sense, the arrival of electric cars and hybrids also forces us to react to really follow this movement. g1 – Finally, what economic and business challenges does Volks see ahead? First, the wars and conflicts that are happening around the world do not help the supply of production lines. There are many parts that cannot reach Brazil, creating a supply challenge that still exists here. The second challenge is economic. Interest rates are still high for customers to buy — and our business is very dependent on credit. The third point is Argentina. The country is one of Brazil’s major trading partners. We have two plants there and we are very strong in market share. If Argentina doesn’t rise, I won’t be able to export cars from Brazil there. Practically all automakers have factories in the country. A strong Argentina, therefore, also helps our business. The last point is electrification. How fast will it occur in Brazil? We are also following this movement.

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