The Brazilian auto export industry is poised for a substantial downturn in 2023, according to the recent announcement by the automaker association, Anfavea. This projected decline comes as a direct consequence of the severe economic challenges currently facing Argentina, a key trading partner.
Anfavea, in a statement released on Friday, revised its export projections for the year, anticipating a significant 12.7% decrease in exports to 420,000 vehicles. This revision starkly contrasts with the association's previous estimate of a mere 2.9% decline for the same period. In their statement, Anfavea highlighted that exports have been a concerning aspect of the automotive sector's performance during the first nine months of the year.
The crisis in Argentina, which has been grappling with economic instability for an extended period, has resulted in Brazil's largest trading partner losing its status as the primary destination for Brazilian auto exports. Mexico has assumed that role in 2023.
Argentina, preparing for a presidential election on October 22, has experienced persistent challenges, including annual inflation rates exceeding 120% in 2023. The country's central bank reserves have entered negative territory, leading to a 20% devaluation of the peso in August.
Anfavea reported an 11.2% decline in auto exports from Brazil during the first nine months of 2022 compared to the same period in the previous year. In addition to the Argentine crisis, the association attributed the decline in market share to losses in countries like Chile and Colombia, impacting Brazil's overall exports.
In contrast, the Brazilian domestic automotive market has outperformed expectations. This led Anfavea to revise its forecast for local sales in 2023, anticipating a total of 2.23 million vehicles sold, up from the previous projection of 2.17 million. This represents a 6% year-on-year increase.
The Brazilian market's strength can be attributed to a temporary government program initiated in June, which aimed to reduce vehicle prices through tax benefits. Although the program's tax credits were quickly exhausted, the market continued to thrive.
Marcio de Lima Leite, the head of Anfavea, commented on the market's performance, stating, "There was a fear that the market would contract after the end of the credits offered by the federal government, but average daily sales have been consistently growing for the past two months."
However, it is worth noting that the increased domestic demand does not necessarily equate to higher local production. Leite explained, "Two-thirds of this increased domestic demand is being met by imported products."
As a result, Anfavea has adjusted its forecast for Brazil's auto production in 2023, now expecting a modest 0.1% increase compared to the previous year, a substantial reduction from the previous estimate of 2.2% expansion. Total output is predicted to reach 2.37 million vehicles in the coming year.
