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THE BRAZILIAN AUTOMOTIVE SECTOR OPPORTUNITIES ON LATIN AMERICA’S LARGEST AUTOMOTIVE MARKET São Paulo August 2015

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Page 1: THE BRAZILIAN AUTOMOTIVE SECTOR - Business …€¦ ·  · 2015-11-10THE BRAZILIAN AUTOMOTIVE SECTOR ... auto parts producers States with 30 to 72 auto parts ... automakers 25% of

CONFIDENTIAL

FOR INTERNAL USE WITHIN CLIENT COMPANY ONLY

THE BRAZILIAN

AUTOMOTIVE SECTOR

OPPORTUNITIES ON LATIN AMERICA’S LARGEST AUTOMOTIVE MARKET

São Paulo

August 2015

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BUSINESS SWEDEN 28 OCTOBER, 2015 2

BRAZIL IS THE WORLD’S 8TH

LARGEST AUTOMOTIVE

PRODUCER

SOURCE: OICA, IBGE, BRAZILIAN CENTRAL BANK

1

5,5% of Brazil’s GDP

BRL 266bn in 2013

Brazil is currently the 8th largest automotive

producer in the world, as well as the 6th largest

market for new light vehicles

Growing

production

capacity

Growing

exports to

LATAM

Large

automotive

market

Brazil has approximately 200 vehicles* per 1 000

inhabitants, while Sweden has 530 and the US has 790

* INCLUDES COMMERCIAL VEHICLES

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2003-2013 PRODUCTION OUTPUT OF LIGHT VEHICLES

IN BRAZIL INCREASED WITH 120%

SOURCE: ANFAVEA

28 OCTOBER, 2015 BUSINESS SWEDEN 3

ASSEMBLED LIGHT VEHICLES PRODUCTION IN 2014, IN THOUSAND UNITS

EXPECTATIONS ARE THAT DEMAND AND PRODUCTION OUTPUT WILL START RECOVERING AS FROM 2016

ASSEMBLED HEAVY VEHICLES PRODUCTION IN 2014, IN THOUSAND UNITS

0

500

1 000

1 500

2 000

2 500

3 000

3 500

2000 2003 2006 2009 2012 2015*

Cars and Light Commercials Imports Exports

0

50

100

150

200

250

300

2000 2003 2006 2009 2012 2015*

Trucks and Buses Imports Exports

* ESTIMATE

DUE TO ECONOMIC CRISIS IN BRAZIL, PRODUCTION HAS DROPPED THE LAST TWO YEARS

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1

PASSENGER

CARS LIGHT

COMMERCIALS TRUCKS BUSES

BUSINESS SWEDEN 28 OCTOBER, 2015 4

THE AUTOMOTIVE INDUSTRY IS CONCENTRATED IN THE

SOUTH AND SOUTHEAST REGIONS OF BRAZIL

SOURCE: ANFAVEA, SINDIPEÇAS

SÃO PAULO STATE HAS BY FAR THE LARGEST AUTOMOTIVE INDUSTRIAL CLUSTER IN BRAZIL

GEOGRAPHIC DISTRIBUTION OF BRAZIL’S AUTOMOTIVE

INDUSTRY 2014

São Paulo state, 419 auto

parts producers

Brazilian state with less than 30

auto parts producers

States with 30 to 72 auto parts

producers

4

Volkswagen

Fiat

General

Motors

Ford

Renault

Mahindra

BMW

Honda

Peugeot

Citroën

Toyota

Hyundai

Nissan

Mitsubishi

Fiat

General

Motors

Volkswagen

Renault

Mitsubishi

Hyundai/CAOA

Nissan

Mahindra

Agrale

Iveco

MAN

Ford

Volvo

Scania

Agrale

DAF

International

Hyundai/CAOA

Mercedes-

Benz

Iveco

MAN

Agrale

Mercedes-Benz

Scania

Volvo

Iveco

International

* NOT INCLUDING AGRICULTURE VEHICLES

OEMS PRODUCING IN BRAZIL*

Number of OEM plants

SC

BA

RS

PR SP

RJ

AM

CE

PE

MG

GO

17

5

8

1

1

4

4

2

1 1

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0 200000 400000 600000 800000

Renault

Ford

General Motors

Fiat

Volkswagen

BUSINESS SWEDEN 28 OCTOBER, 2015 5

SEVERAL INTERNATIONAL OEMS ARE PRODUCING IN

BRAZIL, INCLUDING SWEDISH COMPANIES

SOURCE: ANFAVEA

SCANIA AND VOLVO ARE TWO OF THE LARGEST PRODUCERS OF HEAVY VEHICLES IN BRAZIL

TOP 5 AUTOMOTIVE PRODUCERS IN BRAZIL BY SEGMENT IN 2014, PRODUCED UNITS

0 50000 100000 150000 200000

Mitsubishi

Renault

Volkswagen

General Motors

Fiat

0 5000 10000 15000

Volvo

Scania

Agrale

MAN

Mercedes-Benz*

0 20000 40000 60000

Scania

Ford

Volvo

Mercedes-Benz*

MAN

PASSENGER CARS TRUCKS

BUSES LIGHT COMMERCIALS

* NUMBERS FOR MERCEDES-BENZ ARE AN ESTIMATE BASED ON THE

BRAZILIAN SUBSIDIARY’S EXPORTS AND REGISTERED VEHICLES

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BUSINESS SWEDEN 28 OCTOBER, 2015 6

SOURCE: BNDES, ANFAVEA, PRESS RELEASES

Opening: 2016

Location: Iracemápolis (SP)

Investment: 500 MBRL

Capacity: 20 000 vehicles/year

Mercedes-

Benz

Opening: 2015

Location: Itirapina (SP)

Investment: 1 BBRL

Capacity: 120 000 vehicles/year

Honda

Opening: 2016

Location: Tatuí (SP)

Investment: 100 MBRL

Capacity: 10 000 trucks/year

Shacman

Opening: 2016

Location: Porto Feliz (SP)

Investment: 1 BBRL

Capacity: 200 000 engines/year

Toyota

Opening: 2016

Location: Jacareí (SP)

Investment: 530 MBRL

Capacity: 25 000 vehicles/year

Chery

Opening: 2016

Location: Itatiaia (RJ)

Investment: 750 MBRL

Capacity: 24 000 vehicles/year

Land

Rover

Opening: 2015

Location: S. José dos Pinhais (PR)

Investment: 500 MBRL

Capacity: 250 000 vehicles/year

Audi

Opening: 2016

Location: Camaçari (BA)

Investment: 1 BBRL

Capacity: 100 000 vehicles/year

JAC

Opening: 2015

Location: Goiana (PE)

Investment: 7 BBRL

Capacity: 250 000 vehicles/year

FCA

Opening: 2016

Location: Campina Grande (PB)

Investment: 50 MBRL

Capacity: 3 000 buses/year

IBRAVA

(local)

EVEN DURING ECONOMIC CRISIS, LEADING OEMS ARE INVESTING TO EXPAND PRODUCTION IN BRAZIL

1 2

3 4

5 6

7

8

9

10

1

2

3

4

5

6

7

8

9

10

OEMS WILL INVEST APPROXIMATELY 60 BBRL 2015-2018

SÃO PAULO CONTINUES TO RECEIVE THE HIGHEST SHARE OF NEW INVESTMENTS

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BUSINESS SWEDEN 28 OCTOBER, 2015 7

BNDES FINANCING IS A KEY DRIVER FOR PURCHASES

OF TRUCKS AND BUSES ON THE BRAZILIAN MARKET

SOURCE: BNDES, MEDIA OUTLETS

RECENT RESTRICITIONS IN BNDES FINANCING HAS BEEN KEY FACTOR BEYOND THE CURRENT DOWNTURN FOR THE INDUSTRY

BNDES is the Brazilian

Development Bank Through its financing program

FINAME, BNDES also finances

the acquisition of new trucks and

buses

BNDES finances 50-70% of the

vehicle’s acquisition value with

below-market interest rates

BNDES finances investments

from companies such as

automakers

25% of BNDES’ total financing

credits for innovation is destined

to the automotive industry

BNDES disbursed 5,3

BBRL for automakers’

investments in 2014

As an example the new

Fiat-Chrysler plant in

Goiana (PE) was granted

3,3 BBRL from BNDES

The sales of trucks and

buses has dropped in

2015 after BNDES

increased interest rates

BNDES will offer

financing of 18 BBRL for

trucks and buses in 2015

State-controlled BNDES

grants financing with

below-market interest rates

for strategic sectors in the

Brazilian economy

BNDES ALSO FINANCES NEW INVESTMENTS FOR AUTOMOTIVE PRODUCERS

Page 8: THE BRAZILIAN AUTOMOTIVE SECTOR - Business …€¦ ·  · 2015-11-10THE BRAZILIAN AUTOMOTIVE SECTOR ... auto parts producers States with 30 to 72 auto parts ... automakers 25% of

BRAZILIAN AUTOMOTIVE COMPONENTS MARKET IN 2013

12,8

7,0

5,4 4,9

4,2

2,1 1,9 1,9

3,2

2,1

0,9 0,5

4,0

1,9

0,9

2,5

0,4 0,3

-

2,0

4,0

6,0

8,0

10,0

12,0

Othercomponents

(seats,bumpers)

Enginecomponents

Transmissioncomponents

Electriccomponents

Steering andSuspensioncomponents

Brakecomponents

Production Value Imports Exports

BUSINESS SWEDEN 28 OCTOBER, 2015 8

BRAZIL IMPORTED 3,2 BUSD WORTH OF TRANSMISSION

COMPONENTS IN 2013

SOURCE: IBGE, MINISTRY OF DEVELOPMENT, INDUSTRY AND FOREIGN TRADE * EXCHANGE RATE 2014 1USD = 2,40 BRL

SIGNIFICANT LONG-TERM POTENTIAL FOR SWEDISH AUTO PART PRODUCERS ON THE BRAZILIAN MARKET

BUSD Many multinational automotive system

integrators are producing in Brazil, such

as: Dana, Magneti Marelli, SKF and ZF

Brazil is importing components like:

Gearbox and its components

Cylinder blocks

Transmission axles

Suspension shock-absorbers

Electronic components

Spark-ignition engine components

The imports of transmission components

grew at an average of 10% per year in

the last 5 years.

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BRAZILIAN FLEET OF ELECTRIC VEHICLES IS EXPECTED TO REACH 35 000 UNITS IN 2020

BUSINESS SWEDEN 28 OCTOBER, 2015 9

CHINESE COMPANIES SUCH AS BYD ARE INVESTING IN

THE BRAZILIAN ELECTRIC VEHICLE MARKET

SOURCE: ABVE, BNDES

MARKET FOR ELECTRIC VEHICLES STILL VERY SMALL BUT NEW INVESTMENTS AND INCENTIVES IS DRIVING MARKET FORWARD

ELECTRIC

VEHICLES

(EVs)

Very small fleet of EVs (3.000 units), with

less than 0,03% of registered units in

2014

EVs are 11% of vehicles in Japan and 4%

in the US

Insufficient investments in electric

transport infrastructure

There are around 50 charging stations in

Brazil

Poor energy infrastructure, investment

and planning throughout Brazil

Still relatively high tax burden on EVs

despite recent tax reductions

Chinese companies such as BYD are

interest in producing EVs in São Paulo

Investment of 3 BUSD (next 5 years)

Mitsubishi is developing an electric bus

along with a local company

BMW is studying the production of EVs in

Brazil

Volvo produces hybrid buses in Brazil

since 2012

New BNDES incentives for the financing

of electric buses and research

Recent state and municipal tax reduction

over property of EVs

Federal law project establishing the

installation of new charging stations

Page 10: THE BRAZILIAN AUTOMOTIVE SECTOR - Business …€¦ ·  · 2015-11-10THE BRAZILIAN AUTOMOTIVE SECTOR ... auto parts producers States with 30 to 72 auto parts ... automakers 25% of

COMPLIANCE REQUIRES INVESTMENTS IN LOCAL R&D AND ENGINEERING CAPACITY

BUSINESS SWEDEN 28 OCTOBER, 2015 10

INOVAR AUTO OFFERS TAX REDUCTIONS FOR

AUTOMAKERS INVESTING IN BRAZIL

SOURCE: INOVAR AUTO

In 2012, the Inovar Auto

programme was developed

in order to encourage vehicle

technology innovation and

promote allocation of

production and R&D to Brazil

The programme fosters

industry competitiveness by

encouraging automakers to

produce more efficient, safer,

and technology-advanced

vehicles while investing in

the local automotive industry

Compliance with

Labelling System

Engineering

Investments (1% of turnover)

R&D Investment (0,5% of turnover)

Energy Efficiency

Local

Manufacturing

Processes

• Up to 30%

discount on IPI

tax*

• 1-2% additional

discount in IPI,

according to

investments in

R&D and

engineering

MANDATORY 2 OUT OF 3

ARE REQUIRED

REQUIREMENTS BENEFITS

INOVAR AUTO IS STIMULATING AUTOMOTIVE INVESTMENTS IN BRAZIL

*Tax on industrialized products similar to VAT

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BUSINESS SWEDEN 28 OCTOBER, 2015 11

AUTOMOTIVE INDUSTRY IS EXPECTED TO PICK UP IN

2016 OFFERING NEW BUSINESS OPPORTUNITIES

ONE OF THE WORLD’S LARGEST MARKETS OFFERING SIGNIFICANT LONG-TERM OPPORTUNITIES FOR AUTOMOTIVE SUPPLIERS

Which

opportunities

make Brazil

interesting?

What

challenges

should companies

be ready to face?

Excessive bureaucracy and complex tax system

High production costs

Current economic crisis

6th largest automotive market in the world

Still relatively low number of vehicles per capita

Good financing opportunities for the acquisition of

trucks and buses by companies

Market

Suppliers

Local Production

Market

Business in Brazil

Investments

High imports of

autoparts

Exponential local

production growth

Local presence of

major OEMs and Tier 1

suppliers

Large investments in new plants and supplier parks

Government tax incentives for OEMs

High exports of trucks and buses

Automotive industry crisis connected to Brazilian

economic crisis

Decrease in local sales and exports

Increase of BNDES

financing interest rates

Low investments and

infrastructure for

electric vehicles

Page 12: THE BRAZILIAN AUTOMOTIVE SECTOR - Business …€¦ ·  · 2015-11-10THE BRAZILIAN AUTOMOTIVE SECTOR ... auto parts producers States with 30 to 72 auto parts ... automakers 25% of

BUSINESS SWEDEN OFFERS A FULL SERVICE

PORTFOLIO FOR EFFICIENT MARKET ENTRY

* BSO SERVICES INCLUDE: OFFICE PLACE & SERVICE, ADMINISTRATION, COMPANY ESTABLISHMENT (INCL

LEGAL ADRESS) , DELEGATE MANAGER AND FINANCIAL ANALYSIS

28 OCTOBER, 2015 BUSINESS SWEDEN 12

ICT

OUR INDUSTRY FOCUS

HEALTH CARE

& LIFE

SCIENCE

MATERIALS &

MANUFACTU

RING

SECURITY CREATIVE

INDUSTRIES

ENERGY &

ENVIRONMENT

TRANSPORT

SYSTEMS

OUR CUSTOMERS

SWEDISH COMPANIES EXPANDING

INTO BRAZIL LOCAL SUBSIDIARIES OF

SWEDISH COMPANIES SWEDISH GOVERNMENT

OUR MARKET OFFERING

MARKET ENTRY

STRATEGY

OUR STRENGTH

PARTNER

SEARCH STAKEHOLDER

MANAGEMENT

IMPORT

ANALYSIS

SOURCING

ANALYSIS ACQUISITION

SUPPORT

MARKET

ANALYSIS

BUSINESS

SUPPORT

OFFICE *

RECRUITING

EXPERIENCED

TEAM WITH

INDUSTRY FOCUS

UNIQUE OWNERSHIP PROVIDE

ACCESS TO THE SWEDISH

GOVERNM.& FUNDING STRUCTURE

GLOBAL

PRESENCE

LOCAL& SWEDISH

PERSPECTIVE TO BUSINESS

OPPORTUNITIES

ACCESS TO HIGH LEVEL

AUTHORITIES & BUSINESS

NETWORKS IN BRAZIL

Page 13: THE BRAZILIAN AUTOMOTIVE SECTOR - Business …€¦ ·  · 2015-11-10THE BRAZILIAN AUTOMOTIVE SECTOR ... auto parts producers States with 30 to 72 auto parts ... automakers 25% of

CONTACT US

BUSINESS SWEDEN IN BRAZIL

Rua Joaquim Floriano, 466 – cj 1908 – Ed. Office

BR 04534-002 – São Paulo - Brazil

Phone: +55 11 2137 4400

Fax: +55 11 2137 4425

[email protected]