HIDA/AOTS Alumni Report, Sao Paulo

 The Auto-Parts Industry in Brazil under the INOVAR-AUTO
 -Huge New Opportunities for Japanese Companies-


Instituto AOTS Alumni São Paulo
Paulo Hirai、Ugo Ibusuki



      In the last two decades, Brazil has undergone a deindustrialization process due, to a large extent, to the country’s macroeconomic decision to overvalue the Real (Brazil’s currency), as part of the policy to end the hyperinflation plague.

      The auto-parts industry revenue went from US$12.2 billion in 1990 to $11.3 billion in 2002 and to $41.8 billion in 2012. However, the imports evolved from US$0.8 billion in 1990 to $4.1 billion in 2002, reaching $16.3 billion in 2012. While overall revenues grew a little over three times, imports grew almost 20 times in the period. Competition from imports caused many local manufacturers to become unprofitable.

      After years of overvaluation, the Real is finally getting back to its purchasing power parity, evolving from R$1.70 per dollar in 2012 to the current R$2.30 per dollar.
The Brazilian Government launched the INOVAR-AUTO (Innovate Auto), a program to encourage the use of more auto-parts made in Brazil (Mercosul), to increase automobile efficiency, and to foster innovation, among other objectives. The country’s current negative balance of payments is influencing the Government to provide support to the local industry. This incentive program was set by the Brazilian Ministry of Development, Industry and Trade.

      In order to qualify for the significant tax incentives (up to 30% of the vehicle sales price) provided by INOVAR-AUTO, automakers have to increase the use of auto-parts made locally (Mercosul) while at the same time improve automobile efficiency. This new environment creates a challenge for Brazilian auto-parts manufacturers as most of them do not have the technology or financial strength required to meet the newly created demand. This represents a great opportunity for Japanese auto-parts manufacturers that have the required technology to enter the Brazilian market.
Keywords: Brazil, Automotive, Auto-parts, INOVAR-AUTO, Incentive, Opportunity


●Table of contents
1. The Brazilian Automobile Industry
2. The Brazilian Auto-Parts Industry [HTML]
4. Issues to Consider When Entering Brazil’s Market
Synthesis of the Analysis and Conclusion


Whole paper [PDF]