brazilian new automotive policy inovar-auto · balance trade for automotive parts sector has turned...
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Brazilian New Automotive Policy
INOVAR-AUTO
25th March 2013
Ugo Ibusuki
Researcher, Institute of Auto-parts Industry, Waseda University
Visiting Professor, Department of Post-graduation, University Center of FEI
ESCOLA POLITÉCNICA
UNIVERSIDADE DE SÃO PAULO
2
1. Brazilian Automobile Industry
2. Brazilian Auto-Parts Industry
3. Brazilian New Automotive Policy – INOVAR-AUTO
4. Critical Analysis of INOVAR-AUTO
Outline of the Presentation
3 Source: ANFAVEA, Roland Berger
Based on strong growth in the last years, Brazil has now become the 4th largest automotive market
globally
4 Source: ANFAVEA, Roland Berger
And in the next years, the Brazilian automotive market will show a sustainable growth
5 Source: ANFAVEA, Roland Berger
The future growth of the Brazilian automotive industry is based on three fundamental trends
More than US 20 billions was announced in investments to increase capacity in more than 2.5 million units
until 2015
PASSENGER CARS COMMERCIAL VEHICLES
Source: Roland Berger, Team analysis
*
*Substitution
KEY PRIORITY BY NEWCOMERS WILL BE GENERATING LOCAL CONTENT
New planned factories in Brazil as well as expansions 2012-2015
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7
1. Brazilian Automobile Industry
2. Brazilian Auto-Parts Industry
3. Brazilian New Automotive Policy – INOVAR-AUTO
4. Critical Analysis of INOVAR-AUTO
Outline of the Presentation
Balance trade for automotive parts sector has turned from a slight positive balance to strongly negative
11,1
9,6
6,6
9,1
7,5
4,8
15,8
13,2
9,19,2
6,7
4,3
-4,6-3,6
-2,5
-0,1
0,80,5
`07 05` 03` `09 11` `10
balance
imports
exports
23%
17%
Others
Autoparts OEM
60%
BALANCE TRADE [US$ BILLIONS FOB] DISTRIBUITON OF IMPORTERS
Source: Sindipeças, Abipeças, Team Analysis
8
Brazil un-competitive in global scenario on the costs side
Source: Roland Berger, Press Clippings, IEDI, ONS
9
10 Source: World Bank, FIESP, Roland Berger
Difficulty of paying taxes Difficulty of getting credit
Structural related indexes indicate clearly the un-competiveness of Brazil
Brazil was not able to offset the increase of cost by productivity and the trend to automation is slow
255
208
130
320
175
100129122118112100
107
2002 2004 2006 2008 2010 2012
Labor cost x productivity [Index 2002=100] Evolution of robot imports 1) [USD m]
Productivity
Cost per hour
23
24
10
64
74
6
52
58
1
97
66
73
7
106
9
2010 2011f 2008 2007 2009
Other industrial robots Welding robots
Source: MDIC , Roland Berger 1)Data for 2011 extrapolated
COST
PRESSURE
REDUCED
MARGINS
OEM
PRESSURE
NO
INVESTMENTS
SUPPLIERS
FIGHT FOR
SURVIVAL
• OEM putting
pressure on
suppliers
based
strongly on
substitution by
importation
• Raw material
suppliers pass
price increases
without much
discussion
• Labor and other
cost increasing
fastly
• No possibility to
pass cost
increase to
OEM’s
• Suppliers are
not able to
compensate
cost increase
• No possibility
to pass cost
increase to
OEM´s
• Low margins
due not allow
investments
• Little or no
chance to get
credit due to
bad financial
performance
• Poisoning
combination
of increasing
cost with
continuously
reduced
margins
The dynamics of the Brazilian supplier market, specially for Tier 2 and 3 can be described as follows
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13
1. Brazilian Automobile Industry
2. Brazilian Auto-Parts Industry
3. Brazilian New Automotive Policy – INOVAR-AUTO
4. Critical Analysis of INOVAR-AUTO
Outline of the Presentation
14
Regional
content
Local
Manufacturing
Investment
in local R&D
and
Engineering
Energy
efficient
products
• Additional IPI reduction of -2% if yearly
targets of % of revenues invested in R&D
• Targets start at 0,65% (combined
development + research) in 2013 and go up
to 1,5% in 2017
• Only valid for passenger cars at a first step
• Brazilian car fleet have to get 12% more
fuel efficient by 2017
• If targets are overachieved add. reductions
of IPI of -1 or -2% possible
• For 2013 at least 6 out of 12 predefined
manufacturing processes have to be local
• From 2013-2017 increasing up to 8 (2017)
processes out of 12 predefined processes
have to be local (passenger car)
• The program
has 3 main
objectives:
protection of the
industry and of
the domestic
market, increase
stimulation of
investment and
innovation,
improve the
energy efficiency
of the vehicles
produced in
Brazil.
• Additionally to Mercosur local content
requirement of 65% over Revenue
• Calculation of local purchase via a
multiplying factor to offset additional
30% of IPI
4 major pillars of INOVAR-AUTO program which impact on OEM and suppliers
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Overview of the conditions of the INOVAR-AUTO, for the period 2013 to 2017
INOVAR-Auto Conditions
6 7 7 8 8
4
16
How the government classifies R&D and Engineering expenses and how to obtain further 2% IPI reduction
Investment in R&D and Engineering
17
Manufacturing Steps
Minimum Manufacturing Steps
c
c
18
Information to the Consumer, as already happen in other sectors and other countries
Car Labeling
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All Passenger cars must meet an average target of 1,82 MJ/km in 2017, a 12% decrease in today figures
Energy Efficiency Target
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The amount of Local Purchases multiplied by a decreasing factor will offset the additional IPI
Local Purchase
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There will be quotas for extra-zone imported vehicles without additional IPI
Quota for Imported vehicle
For new comers, an exempt of additional 30% IPI could be applied for
50% of vehicle production capacity during the 2 years period of plant
installation; other alternative specially for low volume car manufacturers
(upto 35 thousand units per year) a minimum investment of 17 Thousand
Reais per vehicle in order to have the multiplier of local purchase fixed on
1.3 for total period of INOVAR-AUTO
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1. Brazilian Automobile Industry
2. Brazilian Auto-Parts Industry
3. Brazilian New Automotive Policy – INOVAR-AUTO
4. Critical Analysis of INOVAR-AUTO
Outline of the Presentation
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New Opportunities for the Auto-Parts Manufacturers
1 Higher local demand – Newcomers as well as established OEM´s will
be forced to localize in relatively small time period by INOVAR-AUTO
2 Investment in capacity – in short-term supplier basis is the same,
however we expect a run for capacity to meet INOVAR-AUTO
4
Partnership orientation – since new suppliers will try to enter for
follow sourcing of new OEM’s, there are opportunities for JV and
Technology transfer 3 Technology upgrade – there is a need of local supplier to invest in
technology to follow auto-manufacturers on new product development
5 Fiscal Benefits – INOVAR-AUTO has created several fiscal benefits
which could support the development of local supplier chain through
partnership with local OEM’s