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Brazilians

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Submitted By Bleedingme
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Emerging markets

Recent history

The four BRICs
The BRIC’s roller coaster. 2009 Sales dropped in 50%, stabilize in 2010 Annual growth of 15% per year through 2014

Russia

China

The largest one. Share in 53% in 2008 Share is expected to be 61% in 2014

Brazil

The most mature and stable market. Probably remain the second largest to 2014

Outpace both Brazil and China in growth

India

Summary
• • • • • • The 4 BRICs are different There is no standard BRIC car Brazilian favor sporty hatchback Russians – western sedans and SUV Indian seeks ultra-low-cost minicars China – affordable luxury style sedans

Brazil
• The largest South America’s largest economy • Population close to 200 mln • GDP per capita of US$ 10 300 • The rapid growth of China’s economy has dramatically increased export demand for Brazil’s raw materials

Brazil, history
• • • • 10 years ago was a less confident place Economic crisis, history of inflation Political disarray with deep structural problems Seemed destined to remain a country with a great unrealized potential

Brazil now
• Quiet optimism that the country has been set on a more stable path • Still high level of poverty and corruption • But a sense of underlying progress with evidence in official statistics • Incomes are up
• The gap between Brazil’s rich and poor has closed a little

Brazil now
• Locals treat the improvements due to just departing president Luiz Iinacio Lula da Silva (ince 2002) • The country last entered the global economic crisis • One of the first to come out of it • Fiscal stimulus package that without any harm the government’s reputation or result in inflation or capital flight • Economic growth in 2010 - 7-8% • Economic growth in 2011 - 4-5%

Brazil now: automotive market
• In good shape after crisis • In 2009 light vehicles sales over 3mln units in 12,6% ahead of 2008 (in Russia – about 1,5 mln in 50% below 2008) • Tax cuts on small cars and light commercial vehicles and to low interest rate • The country is attracting significant new investment both from vehicle manufacturers presented already and from new entrants

Brazil, production
• Vehicle production is up 17,3% in 2010 vs 2009 to 3,6 mln units • Growth is led by domestic demand and export orders • 2-weeks strikes at a number of manufacturers in September is reflection of strong performance of the industry • Export: about 750,000 assembled and kit vehicles out of the country

Brazil, growth factors
• Forecast sales volume up to 5% -8% • Real incomes continues to grow • Brazil continues benefit from growing trade with China • Credit availability – interest rates are low and credit terms are favourable

Brazil and Mercosur
• Mercosur is an economic and political agreement between Argentina, Brazil, Paraguay and Uruguay. • Founded in 1991. • Its purpose is to promote free trade and the fluid movement of goods, people, and currency. • It is now a full customs union.

Brazil and Mercosur
Objective: the free transit of produced goods, services and factors between the member states. This includes the elimination of custom rights and lifting of nontariff restrictions on the transit of goods Fixing of a common external tariffs (CET) and adopting of a common trade policy

Brazil and Mercosur
• There is an influx of cars from Mexico as the Brazilian currency has appreciated significantly • Governments must act to protect the labourintensive local industries from this . • "You can't open up Mercosur to foreign competition. The product is a generation or two behind global markets so if you do this it would put production lines in jeopardy”

Brazil automotive market, history
• • • • The market is most mature and stable Front runner in terms of auto companies localization 1921 – FMC began to produce Model T First wave OEMs since 80-s (Fiat, Ford, GM, VW) dominates the market • Second wave OEMs (Daimler, Honda, Hyundai, LR, Mitsubishi, PSA) • Long history market • Not block to foreign OEM

Brazil, market structure
• Long and strong presence of foreign OEMs. • The market belongs entirely to foreign OEMs. • The strong presence of highly competitive foreign OEM hindered the establishment of locals. • The overall degree of localization is high. • The first wave OEMS are far ahead in localization

Brazil, localization
• The first 4 have local R&D centers with international reach • Operate several production plants • Manage broad sales network in larges cities as well as in 3th-4th tiers cities

Brazil, R&D
• Human resource: 40,000 well-trained engineers graduate each year • Large population of experienced engineers

4 Role for Localized R&D Centers
Offshore Unit
Engineering Nucleus Local R&D Hub
Center of Competence

• Develop specific contents for products • Has autonomy in executing projects • HQs defines processes and standards • Adapt products to local requirements • Local autonomy in day-to-day projects • HQs arrange exchange of best practices • Develops products for the local market • Autonomy in defining specifications • HQs acts as a consultant • Global leadership in developing product • HQs ensures center integration into company’s global network

Brazil, R&D
• Engineering Nucleus: 30% “tropicalize” global product • Local R&D Hubs – half of industry’s local R&D • Center of Competency – only 20% have full responsibility for developing products for both local and global use.

Brazil, sourcing
• Some OEMs are sourcing from low cost supplier in LA or China • Example: 50,000 tires an 15,000 light wheels from China

Brazil, manufacturing
• The production costs are lower that in triad markets • Costs: – relatively large scale of production, – reliable product quality, – Largely manual performance of processes not critical to quality • Specific local competence – flexibility • Balance between automatic and manual labor. • Export: Only 18% of vehicles, 85% of them go to LA market

Brazil, dealer network and offer
• The first wave OEMs have built up extensive sales networks • The best sellers reflect high adaptation to local req. – carro popular • Targeting market niches • Financing – high level of maturity • Used cars

OEMs targeting niche market
• • • • Fiat : Uno/Mille Midsize sedans: Honda Civic and Toyota Corolla Ford: small, low-cost SUVs Ecosport GM: small MPV Chevrolet Meriva

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