Companies reported highest monthly output this year, but credit crunch is affecting consumers

09/13/2022

---

August was an exceptional month for the automotive industry when compared to the entire period following the start of the pandemic. Production volume was the highest in the year, up 43.9% year-over-year. In addition, production through August reversed the decline to a 4.7% growth and, for the first time in the year, no plant stopped for lack of semiconductors.

While industry leaders have many reasons to celebrate, a number of factors, on the other hand, are cause for concern. The main one continues to be the credit crunch. In August, 70% of the new vehicles sold were paid for in cash.

The leaders of the segment acknowledge that this result is not good because, far from revealing that the consumer, in general, has surplus cash, it actually exposes the difficulty in accessing credit, including high interest rates.

Consumers who need financing to buy a car are not in the market, and those who have funds available are once again doing the math to find out whether it is worth spending the money to buy a good that depreciates as soon as it leaves the dealership.

Márcio de Lima Leite — Foto: Silvia Zamboni/Valor

A good part of the cash sales was seen in regions where agriculture is the main activity, said Márcio de Lima Leite, head of the National Association of Vehicle Manufacturers (Anfavea), during the presentation of the sector’s performance last week.

The cash payment modality has also been sustained, in part, by direct sales, or deals closed directly by automakers with large fleet owners, mainly rental companies. The participation of direct sales of automobiles and light commercial vehicles from January to August is noteworthy: 53.3%, according to data from the National Federation of Automotive Vehicles Distribution (Fenabrave).

According to Fenabrave, Fiat was the brand that sold the most in the first eight months of the year, both in retail and direct sales. The second place changes, however, depending on the modality. In retail, the second place went to General Motors, followed by Toyota. In direct sales, Volkswagen took second place, followed by GM. VW’s Gol leads the direct sales ranking in August, but in retail, GM’s Onix was in the first place.

The credit restrictions also hit the second-hand car market, which, during the peak of the semiconductor crisis, was the option for those who did not want to wait in line for new ones. According to Fenabrave, in August, the used car and light commercial sales fell 9.8% year-over-year. In the year-to-date, the drop is 18.12%.

The growth in production, domestic sales and exports last month reveals that the pace of the assembly lines was accelerated thanks to a better offer of semiconductors. The executives of the sector already expected that, in August, Brazil would benefit from the vacation season in the Northern Hemisphere, which reduced demand for chips in Europe and the United States. It is unclear, however, what the supply of semiconductors will look like in the coming weeks.

According to Anfavea, to reach the goal of a market of 2.14 million vehicles in 2022, automakers need to sell 198,000 units in September, 196,000 in October, 204,000 in November, and 233,000 in December. The association is preparing for weaker sales during the World Cup. In August, 208,600 vehicles were sold, up 20.7% year-over-year.

Anfavea maintains its optimism in relation to the domestic market. It considers that sales in recent months have been much more impacted by the lack of supply, caused by the shortage of semiconductors, than by economic factors.

Truck and bus manufacturers are preparing for the last four years of euphoria. With the new emissions rule starting in January, prices will rise. For this reason, many transportation companies have brought purchases forward this year.

The leaders in the sector are now engaged in trying to attract investments from the semiconductor industry to Brazil to reduce dependence on Asian supply, where it is concentrated. This week, a delegation formed by representatives of Anfavea and the federal government is in Japan to present projects to potential investors.

On the external front, the situation in Argentina continues to worry the industry installed in Brazil, which depends, as do other exporters, on foreign exchange reserves, which are increasingly scarce in the country. Argentina closed the month with $600 million in net reserves, according to that country’s central bank.

In Brazil, the employment data was also positive in August, with a slight increase of 1.1% in the permanent staff in relation to a year ago. But the scenario may change in the coming months since Mercedes-Benz announced last week its intention to eliminate 2,200 jobs and close 1,400 temporary jobs in its plant in São Bernardo do Campo, São Paulo.

Following the tendency of its main competitors, Mercedes is entering a new phase, focused on the outsourcing of part of its activities. Negotiations between the company and the local metalworkers’ union start Tuesday.

*By Marli Olmos — São Paulo

Source: Valor International

https://valorinternational.globo.com/