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New Brazilian Automobile Industrial Policy (Plano Brasil Maior): risks and opportunities for the sector
Submitted by Ugo Ibusuki, waseda university Daimler on 27 févr. 2012 - 03:02
Type de publication:Conference Paper
Source:Gerpisa colloquium, Poland (2012)
Mots-clés:Brazilian automotive industry
The Brazilian automobile industry is booming. Domestic sales reached 3.63 million vehicles in 2011, according to the Brazilian Automotive Yearbook (Anfavea, 2011) propelling Brazil to fourth position globally behind China, USA and Japan, but ahead of Germany, France and Korea. The industry expected sales to reach 4.5 million vehicles in 2015 and over 6 million in 2025, with huge investments announced already by automobile manufacturers of more than US$ 30 Billion until 2015. Today the automobile industry represents 23% of total Brazilian Industrial GDP and 5% of total Brazilian GDP.
Brazil has made great progress as a vehicle manufacturing and sales region, but it would be remiss to overlook the weakening of the local industrial base of automobile and auto-parts companies resulting from aspects of foreign currency exchange and the very strong competition of imported products which reached 850 thousand vehicles in 2011 accounting to almost 25% of total domestic sales. The last five years have seen a strong increase in the deficit of the auto-parts sector’s trade balance and cars manufactured here contained so much imported content.
This question clearly gives rise to the issue of competitiveness of the supply chain installed in this country, whose ability to survive in the near future is in serious doubt. This is not a minor problem, as it affects the future of the industry and of the products that will be sold in the country, besides interfering strongly in the local capacity to design parts, systems and end products.
In order to understand the relevance of engineering and engineers in the Brazilian automotive sector we have examined official data from the Brazilian Ministry of Labor and Employment (RAIS - Annual Social Information Report). According to RAIS, the number of engineers employed by the automotive industry in Brazil increased from 4.926 in 2000 to 12.067 engineers in 2010 – regarding the employment composition in the automotive industry, which means 1.8% of the total workforce in 2000 to 2.4% of the composition in 2010. During the same period of time the participation of engineers in the entire Brazilian manufacturing industry increased from 0,55% to 0,86% of the total workforce following a very stable labor composition. In other words, the number of engineers employed by the automotive industry increased more than the level of employment of engineers in the manufacturing industry. Data from the Brazilian Innovation Survey (PINTEC/ IBGE) reveal that most of the engineers employed by the automotive industry are involved in technological activities. Data from the most recent survey (PINTEC 2008) demonstrate that in relation to 100% of the total employment in R&D of the entire Brazilian manufacturing industry, almost 19% of them are employment in Brazilian Automobile Industry, and 1.5% of total revenue are translated to new investment in this field (PINTEC, 2008).
In order to tackle this issue, government has launched in August 2011 a New Automotive Regime called “Plano Brasil Maior” which was strongly criticized by International Community of Free Trade due to its content of market protectionism, increasing local taxation by 30% for imported vehicle except for companies that reach following requirements valid until end 2012 (further measures are under discussion for years 2013-2017):
- 65% regional local content of Mercosur based on revenue;
- investment in local R&D and activities related to product innovation for 0.5% of total revenue;
- specific local production, at least 6 of 11 production system (final assembly, stamping, welding, painting, trimming, plastic injection, engine assembly, transmission assembly, component assembly, chassis assembly, body assembly).
This Industrial Policy was aiming to stop the increase of imported vehicles mainly from Asia (China and Korea) but it doesn’t affect the vehicle importation from Mercosur and Mexico due to on-going Free Trade Agreement. It means main vehicle manufacturers established in Brazil are not affected since they have already established trade channels via Mercosur and Mexico.
This study have analyzed the New Automotive Regime based on Porter’s Diamond Model, looking for the 4 factors of competitive advantage (demand condition; factor condition; firms’ strategy, structure and rivalry; related and supporting industries), and how the industrial policies interfere on it.
Results show that government aim is in line with the theoretical model of Porter’s:
- increase local and export market for local enterprises (demand condition);
- create and strengthen critical competencies for the national economy (factor condition);
- guarantee sustainable growth and social inclusion (firms’ strategy, structure and rivalry).
- increase production of technology to strengthen local value chain (related and supporting industries);
But it brings conclusion that Brazil needs to devise, design and implement a consistent and integrated industrial policy of research, development, product, production and use of automobiles in the country. The absence of such a policy increases the chances for Brazil to become a center of production and commercialization of vehicles conceived externally and produced with increasingly less local content and design with higher prices due to less competition.
This study intends to present a contribution to the debate of the challenges to attract investments in local technological activities of Brazilian Automobile Industry, as well as how to strengthen the connection of these companies in the routes of global R&D network. How the New Automotive Regime can influence the process of attraction and development of activities in R&D for the Brazilian Automotive Industry?