Brazil's automotive industry is the tenth largest in the world and contributes to about 12% of GDP. Brazil plays host to the largest number of car assembly plants (around 30 brands) in the world and is the second largest target of foreign direct investment (FDI) amongst emerging markets. In the 1990s, vehicle production increased over 60% and domestic car sales grew 65%. In 2000, Brazil produced 1.68 million vehicles.

After the Brazilian government eliminated its economic restrictions in the 1990s and opened up the nation’s economy to other countries, automotive companies began establishing manufacturing plants throughout the country.

Over the next several years, the automotive industry invested about US$19.5 billion in Brazilian operations. As a result, annual production of automobiles jumped from 850,000 in 1990 to a peak of about 2 million in 1997. About 94 percent of the cars produced in 1997 were purchased by Brazilian consumers. Meanwhile, the country quickly became a center for testing new models of cars.

Since then, however, the depreciation of the Real and the downturn in the global economy have reversed this strong trend of growth. Car production in Brazil in 2003 totaled only 1.72 million vehicles. About 1.23 million of those cars were intended for the domestic market, with the remaining vehicles delivered to other countries. In the current business environment where purchasing power is low and a high volume of investments must be amortized, the automotive industry is focused on finding new ways to sustain growth.

In fact, more companies such as General Motors and Ford have launched order-to-delivery (OTD) initiatives in an effort to streamline their business processes and reduce

operational costs while increasing customer satisfaction.

Competitive Advantages of the Brazilian Automobile Industry

In the new global automobile scenario, Booz Allen and General Motors in Brazil envision Brazil becoming a leader in technology development for emerging markets because of the country’s stock of highly skilled engineers whose labor costs are lower than those from industrial countries.

An example of the capacity for Brazil’s auto-industry to innovate is its world known development of flex-fuel engines.  From March 2003, when Brazil initiated production of flex-fuel vehicles (gasoline and alcohol) to August 2006, production and domestic sales of flex cars reached 2,000,000 units.  Of the 1,295,040 vehicles sold in Brazil from January to September 2006, about 77% were flex vehicles.

Fiat, Ford, GM and VW have flex fuel development centers in Brazil.  Production engineering in Brazil is widely respected in the world.  The Ford plant in Bahia and the GM plant in Rio Grande do Sul are considered to be model plants.  The Brazilian VW plant designed the Space Fox and Fox Europa models assembled in Argentina.  Fiat Brazil has recently announced an electric car prototype.  Ford Brazil developed the EcoSport model and GM Brazil was selected to develop the next mid size model.

 

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