Jul 06, 2012
Brazil moves to bolster competitiveness of auto sectorBack
The unit notes that the measures are intended to attract new product and capacity investment, and to stimulate research and development within Brazil’s borders. The focus is also on slowing import growth and developing local component suppliers.
Autofacts says the Brazilian auto sector has experienced “incredible growth” in recent years, and now represents the fourth- largest sales market globally. However, this growth has also drawn attention to the weakness of local assembly, as evidenced by an increasing reliance on imports to meet demand.
From 2005 to 2011, the Brazilian market averaged 12% yearly growth, while imports experienced 46% yearly growth. By 2011, imports represented 25% of domestic sales.
The Brazilian government, along with automakers and suppliers, worked together to craft a new automotive policy to stem this tide. The new legislation established the “Programme of incentive to the tech-nological innovation and densification of the automotive supply chain”, more commonly known as Inovar Auto.
The policy allows for a 30 percentage point increase in industrial taxes (IPI) for vehicles sold in Brazil, and outlines the requirement for automakers to enter the programme, which will, in return, grant them IPI tax credits.
Beginning in 2013, companies must be compliant in three of four categories, such as research and development, to qualify for the Inovar Auto programme. Each of these categories will feature gradually increasing criteria until 2017.
In addition to Inovar Auto, to avoid pay- ing a 30 percentage point increase on IPI, a company will need to increase its pur-chasing within the country, measured by its volume of strategic supplier purchases.
The larger the purchase within the country, the greater the benefit the company will receive.
“The investment has the opportunity to lead the Brazilian automotive industry into an era of significant investment and growth,” says Autofacts.
“However, these aggressive measures could also lead to a contraction in an already soft market. “With a slowing economy and auto-motive lending tightening, the timing of such a forceful policy could prove detrimental in the near term,” the unit warns in its report.
In South Africa, there is also a policy shift on its way as the Motor Industry Development Programme is scheduled to be replaced by government’s new Automotive Production Development Programme in 2013.
New incentives include returning between 20% and 30% of a project’s value to investors over a three-year period, in support of investment in new plant and machinery.
The South African automotive industry set a new record last year, with 69%, or 272 000 units, of all vehicles sold in the domestic market imported, up from last year’s 66%.
The percentage of imported vehicles has risen steadily over the last few years, from 9% in 1995 to 32% in 2003 and 63% in 2009.
Vehicles exported from South Africa have also increased, however, with 30% of the 2003 production volume of 421 965 vehicles exported and 51% of the 532 545 units produced exported in 2011.
In total, the local industry achieved the second-highest yearly export figure on record in 2011, at just under 272 000 units. South African vehicle manufacturers exported 186 835 cars, 84 123 bakkies and 805 trucks and buses to 77 countries in 2011.
Edited by: Martin Zhuwakinyu
Creamer Media Senior Deputy Editor
To subscribe email email@example.com or click here
To advertise email firstname.lastname@example.org or click here
Other Automotive News
Machinery and global brands distributor Barloworld Equipment group has invested $14-million in its equipment operations in the city of Kitwe, in Zambia.
Recent Research Reports
Automotive 2016: A review of South Africa's automotive sector (PDF Report)
Creamer Media’s Automotive 2016 Report provides an overview of South Africa’s automotive industry over the past 12 months. The report provides insight into local demand and production, vehicle imports and exports, investment and competitiveness in the sector, as well...
Energy Roundup – April 2016 (PDF Report)
The April 2016 roundup covers activities across South Africa for March 2016 and includes details of a North Gauteng High Court Judge’s dismissal of a court application to postpone the 9.4% electricity tariff increase, which the National Energy Regulator of South...
Electricity 2016: A review of South Africa's electricity sector (PDF Report)
Creamer Media’s Electricity 2016 report provides an overview of South Africa’s electricity sector, focusing on State-owned power utility Eskom and independent power producers, electricity planning, transmission, distribution and the theft thereof, besides other issues.
Energy Roundup – March 2016 (PDF Report)
The March 2016 roundup covers activities across South Africa for February 2016 and includes details of the Department of Energy’s plans to announce the preferred bidders for the first tranche of the coal independent power producer procurement programme; the Council...
Steel 2016: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2016 Report examines South Africa’s steel industry over the past 12 months. The report provides insight into the global steel market and and particularly into South South Africa’s steel sector, including production and consumption, main...
Construction 2016: A review of South Africa's construction industry (PDF Report)
Creamer Media’s Construction 2016 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; key participants; local demand; geographic diversification; corporate activity; black economic...
This Week's Magazine
The two spent-fuel pools at Eskom’s 1 800 MW Koeberg nuclear power station, in the Western Cape, will be full by 2018, increasing the urgency on the State-owned utility to begin pursuing alternative storage options. Koeberg has, over the past 32 years, accumulated a...
South Africa lacks the skills necessary to implement the government’s plan to build 9.6 GWe of new nuclear energy capacity, warns nuclear-qualified Quality Strategies International CEO David Crawford. “Apart from the concern about the affordability of the programme,...
Cybersecurity multinational Check Point has released its latest 700-series cybersecurity systems for small businesses, which draw on its international threat intelligence to provide up-to-date cybersecurity, says Check Point South Africa country manager Doros...
Daimler Trucks and Buses Southern Africa (DTBSA) saw a marked slip in new-vehicle sales in 2015 compared with 2014, with sales dropping from 5 897 units to 5 300 units. The decline came as the South African new truck and bus market declined from 31 558 units in 2014...
Group of 20 (G-20) economies threatened to penalise havens that don’t share information on their banking clients after the leak of the Panama Papers provoked a global uproar over tax evasion. The G-20 will consider “defensive measures” against financial centers and...