Carmakers eye modest Brazil recovery at low-key Sao Paulo Auto Show

Tue Nov 8, 2016 2:51pm EST
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By Brad Haynes and Alberto Alerigi

SAO PAULO (Reuters) - The display stands packed with glimmering sheet metal were smaller than usual and all-new models were scarce. Even most forecasts for a recovery in sales were modest, in keeping with the mood as the Sao Paulo Auto Show opened on Tuesday.

It was a testament to the crisis wracking the Brazilian car market, once the world's fourth-largest. Since reaching a record 3.8 million vehicles in 2012, the market has nearly halved in size.

Executives put on brave faces. Most said the projected end of Brazil's grinding recession next year would allow for single-digit market growth - the first sales upturn in five years.

Yet few seemed ready to make big new bets on a market where automakers poured billions into new factories on the eve of the downturn. More than half of that capacity in Brazil now lies idle.

Volkswagen AG (VOWG_p.DE: Quote) is cutting investments in Brazil in the five years through 2020 to 7 billion reais ($2.20 billion), down from 10 billion reais in the five years through 2018, said Volkswagen do Brasil Chief Executive David Powels.

Ford Motor Co's (F.N: Quote) new chief executive for South America, Lyle Watters, said the U.S. automaker planned to rebound after its drop from fourth to sixth place in the market, but had little to say about how.

"I don't get out of bed in the morning to be in sixth place," Watters said. The only new model he announced, the Mustang, will start being imported to Brazil in 2018.

Watters and other executives projecting a recovery in 2017 weighted their optimism to the second half of next year, once interest rates recede further from decade-highs and double-digit unemployment is expected to subside.   Continued...

People walk past Volkswagen cars during the Sao Paulo International Motor Show in Sao Paulo, Brazil, November 8, 2016.  REUTERS/Paulo Whitaker