Understand why automakers’ yards are crowded – 06/28/2023 – Market

Last Tuesday (27), Volkswagen announced that it will suspend vehicle production at the factories in São José dos Pinhais (PR), São Bernardo do Campo and Taubaté (SP) due to the stagnation of the automotive market.

The announcement takes place in the midst of a federal government program to encourage the purchase of popular cars, which was even renewed this Wednesday (28).

But then what explains the assembly yards being crowded at a time when the government provides incentives to the productive sector?

1- Rental companies are on hold

Automakers and car rental companies expect the government to formalize the expansion of credit for the purchase of cars and also include discounts for companies.

As the first round of the discount program was restricted to individuals, sales for company fleet cars, which include rental companies, were blocked.

A Sheet, Volkswagen confirmed that the ‘sea of ​​cars’ in its courtyard in ABC is the effect of the halt in sales to companies and car rental companies. There was a 31% drop in sales to legal entities from May to June.

2- Rental companies represent a large share of purchases

Vehicle sales by dealerships account for approximately 50% of the total volume. Of the remaining half, most goes to rental companies.

In this sense, the increase in sales through the consumer is not enough to compensate for the rental companies’ losses in license plates.

According to Marco Aurélio Nazaré, president of the national council of Abla (an association that represents the sector), rental companies buy around 50,000 cars per month, and 58% of them are entry-level cars, priced below R$120,000.

“It is necessary for the rental companies to return. For the automakers, what matters is the sales volume. As they have not reached this volume, they will not be producing non-stop”, says Cássio Pagliarini, partner at Bright Consult.

3- Automakers want to balance inventory

According to analysts interviewed by Sheetautomakers are seeking a balance to avoid excess inventory, an asset that depreciates on a daily basis.

“Automakers are opting to stop, because the economic moment is not satisfactory. As much as the government’s measure has helped in the reduction of the value, the interests are still very high and the installments are high for those who need to finance”, says Milad Kalume, director of business development at Jato consultancy.