Industry fears conflict may worsen current crisis, but says it is too early to make forecasts
09/03/2022
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Luiz Carlos Moraes — Foto: Silvia Costanti/Valor
After two years of pandemic, the automotive industry has not yet managed to fully overcome the impacts on the supply chain and already sees a new wave of potential problems with the war in Ukraine. For the National Association of Vehicle Manufacturers (Anfavea), it is still too early to measure the consequences of the conflict, but there are a number of concerns.
The first is the price of commodities (such as oil, steel, aluminum, etc.). Another fear is the supply of semiconductors — an item that has already been a limiting factor for the sector’s production. “Certain raw materials for the production of semiconductors are produced in Russia and Ukraine [such as palladium and neon gas],” says Luiz Carlos Moraes, president of the association.
There are also doubts about the impact of the war on agribusiness, which is an important buyer for automakers, since Russia is also an important supplier of fertilizers. The effects of the conflict on the global logistics chain, which is already experiencing a chaotic situation since the beginning of the pandemic, is another concern. “These are problems that we expected to see equated over the course of this year. With the war, they should continue to put pressure on sea freight and air freight, which the sector has been using to move up deliveries,” he says.
Finally, there is the fear of how the crisis may increase inflationary pressure and generate an increase in interest rates in Brazil. “We already have economists signaling that the Selic can go to 13%, 14%. We hope that the Central Bank will be careful in calibrating the interest rate, because it is not demand inflation, it is structural inflation, brought about by elements from outside. We are very concerned, because this may negatively impact economic activity, especially in the second half of the year”, he stated.
The sector started 2022 in decline, both in production and sales. In February, the industry produced 165,900 units, which represents a decline of 15.8% compared to the previous year, according to data from Anfavea released Tuesday. In the accumulated first two months of the year, the reduction is 21.7%. Sales in the month fell 22.8%. There were 129,300 vehicles licensed in February. In the first two months of the year, the drop is 24.4%. Only exports presented growth this year, 25.4% in February and 17.3% in the first two months of the year.
Even with the negative results and the concerns about the war in Ukraine, the association believes that it is too early to review its projections for 2022. Earlier this year, the association released an estimate of a 9.4% increase in production, compared to 2021. There was also a projection of an advance of 8.5% in domestic sales and 3.6% in exports.
For Mr. Moraes, there are still not enough elements to review the year’s forecasts, which were already made with a relatively conservative view, according to him.
“We have already planned a lower first semester due to the semiconductor restriction, supposing that there could be a lower restriction in the second semester. We have also considered an interest rate at a high level. So we still don’t have elements for a revision. Nobody does. Everybody is trying to understand the dimension of the crisis, the effects on the supply chain. Let’s wait a little longer,” he said.
To compensate for the series of crises, the automotive industry had an important victory in February, with the announcement of the 18.5% reduction in the Industrialized Products Tax (IPI), announced by the federal government.
The association calculates a potential impact on the final price of vehicles of -1.4% to -4.1%. Mr. Moraes points out that the transfer of this discount depends on the individual strategies of the companies, which have also suffered from rising costs. Some companies, such as Ford, Toyota, and Kia, have already announced new tariffs.
Source: Valor International