Foreign Automakers Eye Brazil's Promising Market

Brazil's auto market -- the fourth-largest in the world -- is a top prospect for foreign carmakers seeking new buyers, with strong growth expected in the coming years, industry experts say.

Last week, China's JAC Motors (Jianghuai Automobile Co.) announced it would invest $900 million to build a factory in Brazil, while German luxury carmaker BMW said there was a "high probability" it would also set up an assembly plant.

"The Brazilian market is one of the biggest in the world," finishing fourth last year behind China, the United States and Japan, the director of Brazil's auto industry group Anfavea, Ademar Cantero, told Agence France Presse.

"This year, it should be fifth or sixth. But beyond its ranking, it's a promising market that will show positive growth over the next few years."

Five years ago, Brazil was just the 10th largest auto market worldwide.

But as Cantero explained, while U.S. and European markets are nearly saturated, the South American country only has one car for roughly every 6.5 people -- a ratio that is music to the ears of foreign firms.

The emerging power's "economic stability" and rising household spending translates into what he called a "social migration, towards a category of consumers who are only now buying their first car."

For Cantero, that means the market still has "enormous growth potential. This outlook attracts exporters, and those wanting to invest."

Over the first seven months of 2011, car production in Brazil's 38 auto factories -- most of them in the country's southeastern industrial heartland -- reached 2.02 million units, a 4.3 percent jump as compared with last year.

Anfavea is looking for five percent growth in domestic car sales in 2011, which would mean 3.69 million units sold, and production of 3.42 million units, which would represent a 1.1 percent increase over 2010.

"The trend over the next few years will be to maintain this pace of growth," said Anfavea president Cledorvino Bellini.

He noted that the industry group's projections were "prudent" given an "international situation that is not favorable, and about which we cannot predict the consequences."

Last week, the administration of President Dilma Rousseff included the auto sector in a sweeping government plan of tax breaks and incentives aimed at helping national industry cope with competitiveness lost from the surging real. The Brazilian currency has been hovering at its highest level in the 12 years since it adopted a free exchange system in January 1999. The strength of the real has undercut exports while fueling imports.

Brazil remains one of the fastest-growing economies in the world, with 7.5 percent growth in 2010, but some sectors are ailing. Industrial production fell 1.6 percent in June.

"This is a first step so that we can once again become competitive in the country," said Bellini, who sharply criticized a massive increase in car imports of more than 650 percent over the past five years.

There are more than 30 million cars in Brazil, a country of more than 190 million people. Italian auto giant Fiat leads with 22.9 percent of sales, followed by Germany's Volkswagen with 22.22 percent and U.S. carmaker General Motors at nearly 20 percent, according to industry data.