Brazilian Light-Vehicle Sales Jump 41% in January, Production Up 23%

Brazilian light-vehicle sales leapt 41.2% year-on-year (y/y) in January to 205,328 units, according to data from industry association Anfavea. The figure represents a fall from the high-selling month of December of 11.2%, but it nevertheless underscores the accelerating growth trend in Brazil. "The expansion in the supply of credit continues to be the main reason for the strong performance", Jackson Schneider, president of Anfavea, said at a press conference. "It is normal for sales to fall in January. But last month was still the best January performance ever", Schneider said. Passenger car sales rose 37.5% y/y to 169,530 units, while light commercial vehicle (LCV) sales rose 61.9% y/y to 35,798 units.

Flex-fuel models increased their share of the market to 87.5%, from 86.8% in December. This was the second-highest market share ever recorded for such vehicles. Gasoline (petrol)-run vehicles captured 8.1% of the market, while diesel models held a 4.3% market share.

Fiat took top spot in the passenger car sales chart in January with 42,562 vehicles, closely followed by Volkswagen (VW) with 42,100 units, and then General Motors’ (GM) resurgent Chevrolet brand with 40,343 vehicles, a 52% y/y rise.

Light-vehicle production meanwhile rose 22.8% y/y in January to 240,611 units, driven by domestic demand and exports, which also enjoyed a welcome return to positive territory. Passenger car production increased 20% y/y to 203,955 units, while LCV output rose 41% to 36,656 units.

Light-vehicle exports rose for the first time since October, by 7.7% y/y to 50,276 units. Exports fell 7.4% in 2007 as a whole as the appreciating Brazilian currency hurt exporters’ profits. Exports of passenger cars rose 12.8% y/y to 41,254 units in January, while LCV exports fell 10.7% y/y to 9,022 units.

Outlook and Implications

January, traditionally a holiday month, offered a clear indication of what to expect from the Brazilian market this year as sales continue to be fuelled by the easy availability of credit. Last year was a banner year for the industry, but 2008 looks set to top that with ease.

The current run of remarkable results is a direct consequence of the political and economic stability currently being experienced in the country, which is forecast to continue to underpin steady growth in the market. The Central Bank of Brazil's policy of lowering interest rates continues, and this is sustaining much of the sales activity, along with pent-up demand. This is further helped by the increased availability of credit and the extension of loan periods, combined with the steady decline of the Selic base interest rate, which currently stands at 11.25%, on hold for the sixth consecutive month following two years of steady declines.

Economic growth in Brazil is set to accelerate in 2008, with GDP forecast to expand by around 5.0-5.5%. This will lead to higher consumption, and investment should continue to stimulate overall economic growth. The appreciation of the Brazilian currency continues to affect vehicle manufacturers, making exports uncompetitive and imports cheaper. Indeed, light-vehicle imports rose at above the headline growth rate again in January, by 56.8%, equating to 28,000 units, although this is still not large enough to trouble the industry. The international financial community remains optimistic that Brazil can become an “investment grade” country by the end of 2008; this enthusiasm translates into massive capital inflows—mostly portfolio investment—which bring down the exchange rate. It remains to be seen how Brazil manages excess liquidity; so far, it is doing well by piling up international reserves.

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