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LATIN AMERICA: "7 Compliance Challenges and how to overcome them" report

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back to index backLATINtalk May,  2017


Autos/Trucks: Brazil Production Improving on Export Activity

Brazil auto registrations declined 3% in April, consistent with YTD down 2%. Economic indicators are starting to improve with interest and inflation rates falling for over a year, but GDP and employment growth continue to decline low single digits. Positively, Brazil auto production increased 11% in April (consistent with our estimate), driven by exports +50% yoy. Commercial vehicle production increased 9% yoy in April, roughly in line with our Q2 estimate for 7-8% growth.

- Brazil auto registrations declined 3% in April, consistent with YTD down 2%, but below our Q2 estimate for 10% growth. Economic indicators are starting to improve with interest and inflation rates declining for over a year (off very high levels). However, employment and GDP growth (key auto demand drivers) continue to contract low single digits. Positively, production has been tracking up 20-25% YTD mainly due to higher exports. Exports are likely going to Argentina and other Latin American countries (Peru, Colombia, etc.).

- April sales performance:
----- OEMs gaining share: Nissan (+22%), Ford (+16%), Toyota (+15%).
----- OEMs losing share: PSA (-17%), VW/Audi (-11%), Hyundai/Kia (-4%).

- Brazil auto production increased 11% yoy, consistent with our estimate for 10% growth in Q2. Production is up 21% YTD driven by strength in exports (+50% in April, +65% YTD) on roughly flat demand. Inventories remained roughly flat in the month as higher production was mainly for export. In the back half of the year, we expect Brazil yoy growth to expand low single digits, but an improvement in auto demand drivers could lead to upside in our estimate.

- Commercial vehicle (truck and bus) registrations declined 17% yoy in April, a slight improvement from the 25-30% declines seen in Q1. Demand remains weak given GDP declines and a low level of industrial production. Positively, industrial production is roughly flat YTD after declining 5-10% throughout 2016. While this supports the market bottoming at current levels, there likely needs to be stronger economic improvement for meaningful growth in demand.

- April sales performance:
----- OEMs gaining share: Scania (+14%), Iveco (-10%).
----- OEMs losing share: Volvo (-23%), Daimler (-20%), Ford (-17%).

- Commercial vehicle production increased 9% yoy in April, roughly in line with our Q2 estimate for 7-8% growth. Similar to autos, CV production was driven by strength in exports, which increased 26% yoy in April and are up 30% year-to-date. Inventories were flat in April with higher exports offsetting stronger production rates. Given strong export activity and bottoming demand, we expect Brazil CV production to grow mid single digits in the back half of the year.

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Source: BAIRD - GAI



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