RIO DE JANEIRO, BRAZIL – With the disruption of global production chains amid the pandemic, driver inflation accumulated a maximum of 17.03% in the 12 months ended in March, according to calculations made by the Getúlio Vargas Foundation (FGV) at the request of Estadão/Broadcast, with data from the Consumer Price Index-10 (CPI-10).
The basket includes vehicle prices, fuel, parts, related services, and public fees, such as fines and licenses. Official inflation, the National Consumer Price Index (CPI), accumulated 10.79% in 12 months to March.
The war in Ukraine adds more pressure to oil prices: if nothing else increases in April, only the fuel readjustment made in March by Petrobras will raise this rate to 22.08%.
“Fuel is the focus (of inflation in April), but with the resumption of activities after the pandemic, we may see new readjustments in services that were half-frozen, such as workshops, for example,” predicted Matheus Peçanha, a researcher at the Brazilian Institute of Economics (FGV/Ibre).
On the product side, the most recent IPCA data, corresponding to February, show that new cars accumulated an increase of 22.94% in 18 months of consecutive rises, according to the Brazilian Institute of Geography and Statistics (IBGE).
“A similar movement occurs in used cars and motorcycles. The explanation behind it is the same, the automotive sector has been one of the most impacted by the rupture of production chains,” said Pedro Kislanov, manager of the National System of Price Indexes of IBGE, at the time of the release of the figures.
The used car is already up for 20 months, with an accumulated maximum of 22.66%. Motorcycles have been rising for 15 months in a row and have already become 17.72% more expensive in this period. Other related services such as voluntary insurance, license plates, and repairs have also increased.
Thanks to the heating up of demand, the automotive sector is the only one of the ten that make up the extended retail trade that has managed to pass on to the consumer almost in its entirety the increase in product prices at the factory gate, according to a study by economist Fabio Bentes, of the National Confederation of Trade in Goods, Services and Tourism (CNC).
PARTS
In the 12 months ending January 2022, prices of automotive industry products were 17% higher at the factory gate. The increase in consumer prices in the vehicle and motorcycle, parts and pieces trades at the retail level was 16.5%. It means that 96.8% of the increase in wholesale costs has been passed on to the end customer, Bentes calculated. “The sector is trying to recover the profit margin it lost during the most critical period of the pandemic,” Bentes said.
“The automotive industry was affected by the disorganization of production chains, the lack of inputs, and the rising costs of raw materials and energy,” said André Braz, FGV/Ibre Price Indices coordinator. “If the automotive industry could not satisfy the market, this helped heat up the used car market. New cars went up as much as used cars. If there are no parts, the car becomes scarcer, which causes a supply shock,” Braz said.
HIGH PRICES AND HIGH INTEREST RATES SHOULD SCARE CUSTOMERS AWAY
The dream of a new car has become more distant for Brazilians. Experts predict that rising prices and high interest rates on financing will cool demand.
After two years of strong readjustments, the average price of hatchbacks, a category that includes the cheapest cars, stood in January this year at R$79,000 (US$16,700), according to Cassio Pagliarini, from Bright Consulting, a consulting firm specializing in the automotive sector. In 2016, the average price was R$ 48,000. Corrected for inflation, it would be the equivalent of R$ 62 thousand.
The more expensive credit should curb rises in the coming months, even with the persistence of rising costs, estimates economist Fabio Bentes of the National Confederation of Trade in Goods, Services and Tourism (CNC). “No retail segment is more dependent on credit than the automotive sector. This attempt to recompose the (profit) margin will not go far.”
The average interest rate for vehicle purchases stood at 26.86% in January 2022, according to Central Bank (BC) data compiled by Bentes.
With information from Estadão