From Bloomberg:[INDENT]Chinese automakers are targeting cost-conscious consumers in Brazil, taking sales from General Motors Co., Fiat SpA and Ford Motor Co.
As the second-largest emerging market after China and the fifth-biggest car market, Brazil is key for China’s automakers as they start a world expansion. Chery Automobile Co. and others are trying to follow in the path of Korean makers such as Kia Motors Corp. and Hyundai Motor Co. and become global players.
“There’s been a quicker uptake than I think any of us expected for Chinese brands here in Brazil,” said Jon Sederstrom, director of research firm J.D. Power & Associates in the Sao Paulo office. “Right now, there certainly seems to be consumer interest in the new brand and a product that costs less.”
Brazil’s government, concerned that a surge in imports from China and elsewhere will cause job losses, last week raised a tax by 30 percentage points on all cars with a high proportion of foreign-made parts. President Dilma Rousseff’s government and Finance Minister Guido Mantega have repeatedly expressed worries about damage to Brazil’s manufacturers by imports crowding out locally made goods.
Before last week’s tax increase, a Chinese Chery QQ with air-conditioning, power steering, air bags, CD player and electric windows cost 23,990 reais ($13,440), including import tariffs. That’s 300 reais to 2,100 reais cheaper than the most stripped-down models — without most of the Chery’s features — for Volkswagen AG’s Gol G4, GM’s Chevrolet Celta or Ford’s Ka in Brazil, according to data on the companies’ websites. (These cars are all produced within the region, so they don’t pay import duties.)
Local Production:
Chinese producers will continue to sell low-cost cars in Brazil, though they may move more of their production there to get around the new rules, Sederstrom said in a telephone interview.
The increase in the so-called Industrial Products Tax means that a car with an engine of 1 liter or less will pay a tax of 37 percent. (More than two-thirds of new cars sold in Brazil have 1-liter engines.) Cars with 65 percent of their parts made in the Mercosur trade bloc in South America, or in Mexico, will be exempt from the tax increase and pay only 7 percent.
The measure will raise the cost of imported cars by as much as 28 percent and force foreign automakers to build or buy key components in Brazil, Mantega said Sept. 15. After the tax increase, the Chery QQ may cost more than 30,000 reais if Mantega’s estimated increase is correct.
Import Duties:
Brazil’s motor industry is dominated by Wolfsburg, Germany- based Volkswagen, Turin, Italy’s Fiat and Detroit-based GM, which control about two-thirds of the market between them.
Currently, all of the Chinese cars sold in Brazil are imported. They’re charged import duties of as much as 35 percent, plus the Industrial Products Tax and sales taxes.
Chinese automakers’ market share in Brazil expanded to 3.3 percent in August, from virtually zero in April 2010, according to Fenabrave, the national car dealers’ association.
Brazil is one of several emerging markets where long- established manufacturers from Europe, the U.S. and Japan have been losing market share to new producers from China, which overtook the U.S. last year to become the world’s largest car market.
Research by J.D. Power found that for Brazilian consumers, the cost of owning a car is a more important consideration than quality, design or service, since the price is a bigger proportion of household income than in developed countries.
[/INDENT]Chinese cars beating Brazil