The Brazilian automotive industry at the crossroads: following the global changes or falling behind?

 

The aim of this paper is to analyze the integration pattern that the Brazilian automotive industry, largely dominated by foreign companies, has been following in a context of outsourcing and consolidated global production networks. From this understanding, the paper assesses, in particular, the industry’s capacity to reorganize itself in face of the current global changes, notably the rise of new production and consumer markets, especially China, and the technological revolution reflected, among other things, in the adoption and diffusion of electric vehicles.

 

 

The paper is based on interviews with representatives of important segments of the automotive sector, including automakers, large parts suppliers, and business and workers associations, as well as detailed data analysis from different sources and bibliographic review on the topic. Data sources cover production, investment, sales, trade, and innovation data for the Brazilian automotive industry, considering both automakers and auto parts companies. Main databases used in the paper include those from the:

- International Organization of Motor Vehicle Manufacturers (OICA)

- Brazilian Association of Automotive Vehicle Manufacturers (ANFAVEA)

- National Association of Brazilian Auto Parts Manufacturers (SINDIPEÇAS)

- Innovation Survey of the Brazilian Institute of Geography and Statistics (PINTEC-IBGE)

 

 

Results point to the fact that the Brazilian automotive industry is well integrated into global value chains in terms of trade and capital flows but largely subject to the global strategies of large auto companies operating in the country. Brazil remains an important production center focused, however, on domestic and regional markets, whose relevance for global results of automakers varies across companies, being larger especially for those not at the forefront of the ongoing technological revolution. In other words, traditional players in the Brazilian market are not leading the world technological changes.

In addition, Brazilian vehicle production seems to be ‘locked in’ the flexfuel technology, raising concerns about how fast the adoption and diffusion of a new worldwide production pattern based on electric vehicles to the Brazilian market will be. The emergence of China in this context is also a matter of concern. Hence, policy initiatives to raise the sector’s technological innovation levels in the country, currently lower than the global average for both automakers and auto parts companies, may prove central to assure international competitiveness and domestic production in a sustained way.

 

 

Results of this paper allow the identification of risks and opportunities surrounding the future of the Brazilian automotive industry, given the degree of coordination between governmental policy responses and strategies of large automakers and parts manufacturers in relation to the pace of diffusion of new technological trends in the auto sector in Brazil. The paper, therefore, directly contributes to the formulation of scenarios that could be considered within policy programs regarding the future developments of the automotive sector in Brazil, thus highlighting the role that the Brazilian automotive industry can play in face of global rearrangements.