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Brazil’s high import duties, low-cost supplier countries create challenges for the U.S. aftermarket

Monday, August 26, 2013 - 15:29
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In 2001, Goldman Sachs, the U.S. multinational investment banking firm, coined the acronym “BRIC” to describe the four countries of Brazil, Russia, India and China who, it predicted, would rank in the world’s top six economies by 2032. As if to confirm this prediction it was announced in early 2012 that Brazil had overtaken the UK to become the world’s sixth largest economy.

Despite its relentless economic growth, Brazil’s average per capita income of 11,000 dollars per annum still remains less than one third that of the UK’s. However, even this disparity is gradually being eroded by an ever-increasing middle class with greater spending power. As of November 2012 the Brazilian middle class was estimated at 52 percent of the total population.

With the largest economy in South America, Brazil looked set to cement its high status on the world stage with its hosting of the football world cup in 2014 and the Olympics in 2016. However, this good news for the country’s economy has been marred in recent months by widespread riots, which resulted in an 11.1 percent drop in the sales of new vehicles compared to the same time last year.

While a major percentage of Brazil’s output is focused on agriculture and the processing of foodstuffs, its most important manufactured items are automobiles. Some of the world’s major automobile manufacturers including VW, Ford, Fiat, Honda and Toyota now have large manufacturing plants in Brazil.

In July 2013 the top four selling brands of cars in Brazil were 1- Fiat, 2- Chevrolet, 3- Volkswagen, 4- Ford. Luxury car sales have grown rapidly with the southeast of the country dominating in terms of automobile fleet and new vehicle registrations. Sao Paulo is the leading state in the region and has the greatest number of vehicles.

The most popular types of vehicles are those with flex fuel systems with their multi choice of refuelling options. This popularity is encouraged by the Brazilian government’s support for biofuel usage.

In 2011 Brazil overtook Germany to become the fourth largest vehicle market in the world with sales of some 3.6 million cars and light trucks. Aftermarket sales, however, have not grown in proportion.

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