Vehicle production rises with popular car and reopening – 07/04/2023 – Market

After two months in decline, the industrial production of motor vehicles, trailers and bodies grew 7.4% in Brazil in May compared to April, reported this Tuesday (4) the IBGE (Brazilian Institute of Geography and Statistics).

It is the segment’s biggest high in nine months, since August 2022, when the advance had reached 13.2%. The new result can be associated with at least two questions, according to André Macedo, manager of the IBGE survey.

The first is the resumption of factories that had registered stoppages and collective vacations in March and April. The second is the sector’s preparation for the beginning of the federal discount program for the purchase of popular cars.

“These are factors that justify the growth of this activity”, stated Macedo.

The Luiz Inácio Lula da Silva (PT) government announced tax cuts for popular cars on May 25, after the discussion gained repercussions throughout the month. On May 13th, the Sheet announced the preparation of an incentive plan for this sector of the industry.

In the IBGE survey, the activity of motor vehicles also includes goods such as trucks. According to the institute, the 7.4% increase registered in May was one of the main positive influences for the 0.3% increase in Brazilian industrial production as a whole in the period.

Vehicle sector is far from pre-pandemic

The activity of motor vehicles, trailers and bodywork accumulates an increase of 5% in 12 months and a decrease of 1.5% this year until May. The segment is still 11.4% below the pre-pandemic level of February 2020.

In the view of analysts, high interest rates and household indebtedness have been hampering the recovery of business.

In addition, car rental companies have suspended car purchases pending government incentives. With car sales to company fleets blocked, automakers’ patios were crowded, as shown by the Sheet last week.

This Tuesday, the sector had the official announcement that the Chinese BYD (Build Your Dreams) will deploy an industrial complex for the production of electric vehicles in the Bahian municipality of Camaçari (50 km from Salvador). The planned investment is R$ 3 billion.

Industry has strength, but does not recover losses

According to the IBGE, Brazilian industrial production rose in 19 of the 25 branches surveyed in May. It is the biggest spread of positive rates since September 2020, when 23 activities had grown.

In addition to the vehicles segment, the institute also highlighted the contributions of coke, petroleum products and biofuels (7.7%) and machinery and equipment (12.3%).

On the side of the sectors that negatively pressured the industry in May, there are food products (-2.6%) and pharmochemical and pharmaceutical products (-9.7%). This performance prevented an advance greater than the 0.3% growth in the industry as a whole.

In the accumulated result for the first five months of the year, factory production fell by 0.4% in general. In 12 months, the sector was stagnant, with zero variation (0%).

Macedo, from the IBGE, said that the positive result of May (0.3%) brings “some encouragement”, although the sector is still far from recovering the recent losses.

In this sense, the researcher pointed out that the production of the Brazilian industry remains 1.5% below the pre-pandemic level. “It has an important space to be recovered.”

Business entities cite high interest rates

In a note, Fiesp (Federation of Industries of the State of São Paulo) stated that a greater expansion of factories has been limited by an unfavorable balance of forces.

“The high level of the interest rate stands out, with implications for the indebtedness of companies and families”, said the entity.

Fiesp also declared that the expectation for the performance of industrial production in the coming months is of low dynamism, with a projection of a drop of 0.5% in 2023, which, if confirmed, will be the seventh in ten years.

“The poor performance of the sector can be mitigated with a strong reduction in interest rates and measures that improve the business environment, such as the tax reform,” said the entity.

The Firjan (Federation of Industries of the State of Rio de Janeiro) evaluated that, despite the high in May, the production of the national industry still faces a “low dynamism trajectory”. The entity from Rio de Janeiro also cites the high level of interest as a reason for difficulties.