Vehicle production down in 2023, but sales up

Brazilian manufacturers produced 1.9 percent fewer cars, trucks, and buses last year. New data from Anfavea, a national association of automakers, shows that 2.2 million vehicles were manufactured in 2023, down from 2.37 million the year before.

The decline was mainly due to the truck segment, which fell by 37.5 percent due to emission control rules that came into force in January 2023, the adaptation to which was deemed expensive. Trucks adapted to Euro 6 standards (called Proconve P8 in Brazil) cost 20 to 25 percent more.

In addition, weak demand early in the year led several automakers to halt production and send assembly line workers on vacation.

Still, the year ended with a 9.7 percent increase in vehicle sales — from 2.1 million to 2.3 million new models.

Average daily sales reached 12,400 in December, the best in four years. According to Anfavea, the increase was partly driven by car rental companies, which doubled their average car registrations.

The last month of 2023 also saw several discounts offered on electric vehicles (EVs), sales of which nearly doubled last year. While still a small fraction of the Brazilian fleet — they make up just 0.5 percent of all vehicles in the country — their growth exceeded expectations.

Consumers rushed to buy new EVs, especially before a new federal import tax on electrical goods went into effect at the turn of the year. The import tax on EVs will gradually increase to 35 percent by July 2026, with the rate of increase varying by vehicle model.

For 2024, the projection is that the sale of EVs will grow another 51 percent, with sales of more than 142 thousand units. According to Márcio de Lima Leite, head of Anfavea, the scenario is very positive, even with the new taxes.

Also according to the report, Brazil’s vehicle exports fell by 16 percent, with 403,900 units sent to other countries last year, compared to 408,900 in 2022. More than 50 percent of exports went to Mexico, displacing the top spot previously occupied by Argentina.

According to Mr. Leite, despite the decline, the outlook for the coming years is encouraging due to the Mover program, recently enacted by the federal government to accelerate the decarbonization of the automotive sector, with tax incentives for companies that adapt to sustainability goals. It is expected that at least BRL 3 billion (USD 610,800) in taxes will be sacrificed.

“The Mover program is fundamental for Brazil and its industry, universities, and markets. It represents an optimistic future for the Brazilian scenario. Similar programs are being launched in other markets, such as the U.S. and European countries,” he said.

In fact, the optimism about the program is so overwhelming that Anfavea projects a growth of 6.2 percent in production, 6.1 percent in sales, and 0.7 percent in exports for 2024.

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