GM, Volkswagen Brazilian Units Target Low-Cost Cars at Show
General Motors Corp., Volkswagen AG and Ford Motor Co., the biggest carmakers in Brazil, plan to promote low-cost models at a show this week in Sao Paulo, where falling interest rates are prompting consumers to buy their first autos.
Detroit-based GM, the world's largest auto producer, is investing $240 million to start producing a new small car in Brazil, part of an effort to boost sales in the country and offset a slowdown in exports. The company will introduce the new Prisma model at Sao Paulo's 24th Biennial International Automobile Show and start selling it this month, spokesman Pedro Luiz Dias said.
"Brazil
's auto industry is increasingly shifting the focus to economy cars", Giancarlo Pereira, an economics professor at the
University of
Sao Paulo who studies the automobile industry, said in an interview from
Campinas, Brazil. "That's what it has a knack for and that's what consumers want."
New vehicle registrations in Brazil, Latin America's largest economy, climbed 10 percent in September from a year earlier after the central bank lowered the overnight lending rate to the lowest in at least two decades, making financing for new cars more attractive. Policy makers have reduced the rate by 5.5 percentage points over the past year to 14.25 percent in August.
Growing demand for so-called economy cars in Brazil will help automakers boost domestic sales in coming years, Pereira said.
"The New Niche"
GM's new car is "designed for new professionals getting into the market, which we believe is the new niche," Dias said in an interview in Sao Paulo.
GM, Volkswagen and Dearborn, Michigan-based Ford are among 140 expositors in the Sao Paulo show between Oct. 19 and 29.
Declining interest rates are also encouraging Brazilians to replace their conventional cars with flexible-fuel vehicles that can run on ethanol, which costs less than gasoline in Brazil. So-called flex-fuel cars, which account for more than three quarters of new cars sold in the country, can run on ethanol, gasoline or any blend of the two.
Volkswagen, Europe's biggest carmaker, said it will build two new models at its biggest plant in Brazil after workers agreed last month to a plan to cut labor costs. The Wolfsburg, Germany-based company said last month management approved production of the new models at the company's plant in Sao Bernardo do Campo, Brazil, in 2008 and 2009. The company didn't disclose the amount of the investment at the plant.
Market Share
PSA Peugeot Citroen, Europe's No. 2 carmaker, plans to nearly double its market share in Brazil with the introduction of new models in the country by 2010. Paris-based Peugeot forecasts its market share may rise to 10 percent in 2010 from 5.6 percent today, Pierre-Michel Fauconnier, the company's general director in Brazil, said in an interview in Sao Paulo in June.
Rogerio Louro, a spokesman for Peugeot, and Flavio Chantre, a spokesman for Volkswagen, didn't return calls seeking comment.
Renault SA plans to inject 300 million euros ($376.3 million) to expand production in Brazil and boost distribution to reach 107,000 cars sold yearly by 2009, Les Echos reported last week, without saying where it got the information.
(Published by Bloomberg, October 16, 2006)