Brazil’s automotive growth strategy gains traction

Brazil is currently preparing to implement a new program for the automotive sector, which has been branded as Route 2030. Built on the former Inovar-Auto (Incentive Program for Technological Innovation and Intensification of the Automotive Vehicle Productivity Chain) program which ended in December 2017, the focus will shift from the local to the export market.

Goals set for the Inovar-Auto program were aimed at increasing competitiveness, attracting investment and positioning Brazil as a producer of cheaper cars. At the end of the cycle, there was a 15,46% increase in the efficiency of the fleet produced in the country.

The policy was also fueled technological innovation in Brazil. Between 2013 and 2017, 58 patent applications related to the automotive sector were filed in the country. Only nine applications were filed in the five years prior to the program. It is estimated by the Ministry of Industry, Foreign Trade and Services (MIDC) that the program attracted around US$ billion in research and development to Brazil.

One of the more recent investments is the Fiat Chrysler Automobiles (FCA) dynamic and active vehicle safety simulator center. SIMCenter is the first such FCA facility, and the first of its type in the southern hemisphere. The US$5.5m project is a partnership between FCA and the PUC Minas University and is financed by the Brazilian Development Bank (BNDES).

The Fiat Automotive Plant is the largest vehicle factory in Latin America, and one of the biggest plants of the world, with production capacity of 800,000 units per year. It will allow FCA and its suppliers and partners to develop and test safety systems and components as well as innovative urban solutions based on telemetry signals, such as ADAS, using the concept of driver-in-the-loop. New investment in safety systems is being stimulated by the Brazil Transit Council (Contran), which in December 2017 released new regulations regarding mandatory safety items in all vehicles sold and produced in the country. Although Inovar-Auto was largely internally focused, it helped increase automotive exports out of Brazil. MIDC statistics show that Brazil exported more vehicles in 2017 than ever before.

Some 791 thousand cars and cargo vehicles were sold to 83 different markets, an increase of about 40% if compared to 2016. The forecast for 2018 is that OEMs will set a new export benchmark. Route 2030 seeks to align Brazilian vehicles and components to the global standards in terms of safety, energy efficiency, reduced emissions and technological advances through three investment cycles over 15 years. “We understand that the measures being adopted now reflect the direction in which the Brazilian auto industry is moving and, more importantly, what will be Brazil’s role in a context of global decisions,” says the Minister of Industry, Foreign Trade and Services, Marcos Jorge de Lima.

Government support will be in the form of a reduction of taxation on hybrid and electric cars and creating policy certainty for the automotive sector. There will also be a focus on developing the skills needed by the industry, which provides around 1,6 million jobs and accounts for 22% of the country’s industrial GDP. One of the attractions of Brazil as an investment destination for the auto sector is that the country is expected to sign a free trade agreement with the European Union, enabled by the signing of an agreement between Mercosur and the European bloc. Other markets are being opened up by the signing of automotive agreements signed and the conclusion of technical negotiations aiming to simplify and facilitate exports. An agreement signed with Colombia is expected to result in the duty-free export of 25,000 units from Brazil in 2018.

Another South American market being opened up is Brazil through the work of the Brazil-Argentina Bilateral Automotive Committee.

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