SEMA News—April 2012

International
By Linda Spencer

Brazil, Part 2

New Association Forming to Address Hurdles to Customization Market

  Aftermarket Parts Regulation, Auto Legislation, Automotive Industry Research, Brazil SEMA Market Reports
Customized cars always draw big crowds in Brazil. Among the most popular customizations are wheels, tires, audio systems and lowered suspensions, ECU reprogramming, high-flow air filters, exhausts and turbos.
   
Brazil, China and India are outpacing the growth in many mature automotive markets—a trend that is likely to continue over the next few years. The Brazilian trade association Associação Nacional dos Fabricantes de Veículos Automotores (National Association of Motor Vehicle Manufacturers, or ANFAVEA) has estimated that vehicle sales in Brazil will rise 5% during 2012. In fact, the country has already overtaken Germany to become the fourth-largest vehicle market in the world, with sales of 3.6 million cars and light trucks in 2011.

However, the size of the automotive specialty-equipment market has not grown at the same pace.

In last month’s first installment of this two-part series on Brazil, SEMA News explored what drew the industry to this country in the first place—an enthusiastic motorsports and customizing market that has growing passion for hot rods, classic cars, off-roading and racing. And it is home to the fifth-largest populace in the world, with 200 million people.

In the last issue, we also revisited some of the hurdles that were hampering the growth of the market. We reported that there have been some very positive developments since SEMA’s first visit to the country in 2005, including the growth of a middle class, enabling enthusiasts to have growing buying power to purchase specialty products. In addition, interest rates are down from a high of more than 20%, enabling consumers to finance their vehicle purchases and aftermarket parts.

Two other rather steep hurdles still remain. Brazilian-imposed tariffs and taxes make U.S. auto parts expensive, thus threatening to make U.S. products unaffordable. In addition, vague or restrictive laws governing vehicle customization further stunt the growth of this market.

  Aftermarket Parts Regulation, Auto Legislation, Automotive Industry Research, Brazil SEMA Market Reports
Ford recently previewed the all-new Ford EcoSport, a compact SUV designed to attract a new generation of consumers in global markets, including Brazil. See “Automobiles in Brazil” for a list of other popular Brazilian platforms.
   
There is no relief in sight from the onerous taxes and import duties charged on U.S. products, yet some SEMA members have found a way to mitigate, at least partially, the added costs. The import tariff for auto parts ranges from 14% to 20%. And that is before a series of additional taxes, including the Industrialized Product tax and the Merchandise and Service Circulation tax. In addition to these taxes, several smaller taxes and fees apply to imports.

Most of the taxes are calculated on a cumulative basis. The tariff rate is common to the countries in the Mercosur (an economic and political agreement between Argentina, Brazil, Paraguay and Uruguay), though the added taxes are country specific. Yet some SEMA members have found a way to mitigate these added costs. The dollar is currently weak compared to the Brazilian real, making U.S. products less expensive and thus partially compensating for the tariffs and other fees.

“One of the ways to exploit the market is to bring the products in through the Free Zone in Montevideo, Uruguay, and then export from there to Brazil as part of Mercosur,” said Jeremy Barras, president of Advanced Performance Parts Inc.

The other challenge those seeking to sell into the market face is that the laws regarding customization remain quite onerous, but a new Brazilian specialty-equipment association will come on line in the first part of 2012 to address the issue. The association, to be called Associacao Brasileira de Acessorios Automotivos (Brazilian Association of Automotive Accessories, or ABAA) will include manufacturers, importers, distributors, performance shops and publishing companies as its founding members.

“The laws must be changed to make consumers more comfortable accessorizing and customizing their cars,” said Eduardo Bernasconi, the association’s founder and editorial director of Fullpower magazine. “Right now, you can tune up your engine and increase performance by only 10%. ABAA will talk to local legislators and governments to change it and leave a free performance level and work on emissions to have cleaner modified cars.

“Suspension has some limits as well. We’ll try to show the government that a consumer can have a safe modified suspension, higher or lower. Our mission is to work with the legislation, to get it more clear to the consumers, help the people who write laws to understand our market and consider it before changing or making new laws, work to get all the modified, vintage, classic and muscle cars to be driven under laws that recognize these vehicles.”

Bernasconi noted that consumers are customizing even with the tight regulations. He identified the products most in demand as wheels, tires, audio systems and lowered suspension. There is also demand for performance items such as ECU reprogramming, high-flow air filters, exhausts and turbochargers.

For more information about SEMA’s international programs, contact Linda Spencer at lindas@sema.org or visit www.sema.org/international.

 

Automobiles in Brazil

Top 10 Cars
Volkswagen Gol
Fiat Uno/Mille
Chevrolet Celta
Chevrolet Corsa
Volkswagen Fox
Fiat Palio
Fiat Siena
Volkswagen Voyage
Ford Fiesta
Renault Sandero

Source: Federacao Nacional da Distribuicao de Veiculos Automotores

 

 

SUVs
Ford Ecosport
Hyundai Tucson
Mitsubishi Pajero
Honda CRV
Chevrolet Captiva
Kia Sorento
Renault Duster
Kia Sportage
Toyota SW4
Hyundai SantaFe

 

Trucks (Small and Medium)
Fiat Strada
Volkswagen Saveiro
Chevrolet Montana
Chevrolet S10
Toyota Hilux
Mitsubishi L200
Ford Ranger
Nissan Frontier
Volkswagen Amarok
Ford Courier

Aftermarket Parts Regulation, Auto Legislation, Automotive Industry Research, Brazil SEMA Market Reports
The Brazilians are starting a new association to represent manufacturers, importers, the media and distributors in that country. The top goal of this new group will be to work with regulators to ease the restrictions on vehicle modification. Pictured here is the new logo of the group which will include 17 founding members.

 

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