Joann Muller – Forbes, 10/05/2012
Here’s what the world looks like to a car guy inDetroit right now: In the U.S. new regulations are cranking up costs while cautious car buyers creep back into showrooms. China’s once-hot sales are cooling–fast. Europe is a total basket case, with too much production capacity and an allout price war. Carmakers from General Motors and Ford Motor to Volkswagen and Daimlerwarn of difficult times ahead. Market conditions, says VW Chief Executive Martin Winterkorn, have become “noticeably harder and tougher.”
But bring up Brazil and you get a smile. No, they’re not looking forward to a Rio vacation or a cheap retirement. What carmakers see when they look at Brazil is South America’s largest consumer market, a still-bustling economy–and a lot of potential customers. Forget that in the world’s fifth-largest country only 14% of the roads are paved. Incomes are rising, lifting almost 40 million more Brazilians into the middle class since 2003–and putting a vehicle purchase within their reach for the first time. “Brazil is at a critical point right now,” said Guido Vildozo, a Latin America specialist at market research firm IHS Automotive, noting that the country’s GDP has topped $10,000 per capita. “That’s a milestone. If you look back at the U.S., Europe, even Korea, you’ll see that this is when markets move to a growth stage. This is why we’re suddenly seeing all the carmakers focusing on Brazil. They want to try to capture a slice of that pie.”
Anfavea, Brazil’s auto industry trade group, forecasts sales will increase 68% from 3.4 million units in 2011 to 5.7 million by 2016, despite a massive tax burden and high borrowing costs thatdrive up car prices. (In the U.S. sales are forecast to rise 30%.) As early as 2015 Brazil could overtake Japan to become the world’s third-largest car market after China and the U.S., according to Roland Berger Strategy Consultants.
