Brazil automakers will manufacture between 240,000 and 280,000 fewer vehicles this year

RIO DE JANEIRO, BRAZIL – With the semiconductor crisis, Brazil will stop producing between 240,000 and 280,000 vehicles this year, according to an estimate made by the Boston Consulting Group (BCG) and released by Anfavea on Wednesday (8).

In the global automotive industry, the impact will be a loss of production between 7 million and 9 million units this year.

In Brazil, the production of passenger cars registered the worst level for August in 18 years due to the lack of parts. A total of only 119,000 units were manufactured.

^The consulting company reviewed the projections and evaluated that there would be a greater loss than previously estimated. The previous estimate indicated that between 5 million and 7 million vehicles would no longer be produced worldwide. Now, this number is between 7 million and 9 million,” said Luiz Carlos Moraes, president of Anfavea.

Last month, 172,800 units were sold, the lowest number for an August in 16 years. Compared to July, the drop in sales was 1.5%. Since the beginning of the year, total sales had reached 1.42 million vehicles, 21.9% more than in the first eight months of 2020, a period when sales were impacted by the pandemic.

With the pandemic, there was a mismatch between the production of semiconductors and the resumption of demand in the automotive industry. A good part of the chip production was diverted to the gaming industry, computers, and cell phones while the production lines of the automakers were stopped. When they reopened, there was a shortage of parts.

In addition, other external events have disrupted chip production at factories in Japan, Taiwan, Malaysia, and the United States. In Japan, a fire at a production plant halted production, while a blizzard in Texas halted production.

In Taiwan, a water shortage at a major plant halted manufacturing. And in Malaysia, increasing cases of Delta variant Covid disrupted production.

“There was a perfect storm in the sector,” said Moraes, recalling other difficulties in the production of vehicles such as the increase in steel prices, delays in ships that transport parts, lack of containers, and increase in air freight.

BCG estimates that the semiconductor supply problem will only be normalized in the second half of 2022.

In Brazil, another concern of the sector is the high inflation. With the increase in interest rates promoted by the Central Bank to curb price increases, the CDC (Direct Consumer Credit) line of vehicle financing tends to rise. The average CDC rate is at 22% per year, and the estimate is that it will rise to 26%.

“When Selic was at 6%, the CDC was 20%. The interest rates went down to 2% a year, but the CDC didn’t change. Now, when interest rates rise, the CDC is also high,” explained Moraes.