High interest rates and more expensive vehicles prevent the resumption of production

The rise in financing rates is impacting vehicle sales and production. However, according to specialists interviewed by Agência Brasil, car prices have also risen significantly in recent years, which should make it difficult for the market to recover, even if there is a drop in interest rates. “What we had again was the brutal rise in car prices that was dictated by the significant readjustment of component parts, semiconductors, by the exchange rate devaluation and even by the prevailing inflation in recent years. This meant that, as of 2021, we had this galloping price adjustment, without it being generally accompanied by the purchasing power of society”, summarizes Professor at the Getulio Vargas Foundation Antônio Jorge Martins on the elements that made prices more expensive. vehicles. According to a balance sheet released this Monday (10) by the National Association of Motor Vehicle Manufacturers (Anfavea), vehicle production increased by 8% in the first quarter of the year compared to the period from January to March 2022. in the first three months of this year 496.1 thousand units. Despite the number representing an increase, the basis of comparison, last year, is a bad level, when the worst result of the automobile industry since 2004 was registered. Anfavea’s assessment is the high interest rate. In its last meeting, the Monetary Policy Committee (Copom) of the Central Bank maintained the basic interest rate at 13.75% per annum. “It is quite evident that the level of interest rates prevents the return of production to higher levels. It has been working as a handbrake in relation to a more significant resumption of production volumes”, agrees the technical advisor of the Inter-Union Department of Statistics and Socioeconomic Studies (Dieese) at the ABC Metalworkers Union, Luis Paulo Bresciani. More expensive cars However, Bresciani also assesses that, in addition to the increase in interest rates, there was an increase in car prices which, in practice, reduces the size of the consumer market. “Interest rate and, therefore, very impaired credit and financing conditions, on the one hand. And on the other hand, we have a vehicle offer concentrated in models that start from a very high starting point, and therefore alienate a good part of potential buyers”, he points out. The focus on more expensive models was, according to Antônio Jorge Martins, one of the industry’s strategies to be able to deal with the need to pass on the increase in production costs, also driven by investments in technology. “Until then, the focus of all these automakers was volume, producing as much volume as possible. This ceased to exist as there really was a new strategic objective to be met, which was to obtain a profit margin, in such a way as to allow the continuity of these investments that cannot fail to happen”, he explains. For this reason, the expert says that just the drop in interest rates, improving financing conditions, will not be enough for the vehicle market to return to pre-2015 levels. a sharp improvement in the market as a whole”, he emphasizes. The reduction in component prices and the appreciation of the real against the dollar are points that, in Martins’ opinion, can help the industry to regain space. Employment According to Luis Paulo Bresciani, if the industry does not improve results, there may be a reduction in the number of people employed in the sector. Some factories have already adopted measures such as collective vacations and a reduction in the number of production shifts. “The past shows us that whenever there is a reduction in production and sales levels, there is an adjustment in employment. And the adjustment is being made right now in that perspective. They are not automatic reduction measures, but they signal this”, he points out. For him, companies, the government and unions must urgently discuss measures to reverse this trend. “There are a series of measures that can be adopted, not necessarily exemption or changing taxation, but that need to be discussed by the three segments that are part of this governance compatible with democratic decision-making, involving the government, unions and the business sector” , it says. As an example, Bresciani cited incentives for renewing fleets of cars that provide collective services, such as buses, taxis and transportation through apps. He also pointed out that historically, unions defend that vehicles are offered nationally with accessible value and technologically updated.

Agência Brasil