São Paulo – Car makers installed in Brazil should not use the benefits forecasted in the Inovar Auto programme, announced on Thursday (4) by the government of Brazil, to increase exports in the short term. The main target of this automotive regime is to stimulate companies to produce more efficient and safer cars. Those participating in the programme will have tax breaks on the Industrialized Product Tax (IPI).
"Increasing exports was one of the objectives of the government with this programme. But first of all, production should head to the domestic market and only in the long run reflect on exports. The Industrialized Product Tax (IPI) is one of those included in production cost, which is where Brazil is inefficient. When a company that is here decides to export, it competes on the international market with countries that are better prepared,” said the vice president of the Brazilian Foreign Trade Association (AEB), José Augusto de Castro.
Apart from being freed from the 30% increase in IPI announced in 2011 for companies that did not employ 65% of domestic content in the vehicles, companies that participate in the programme will have two more percentage points of reduction if they exceeded rates for investment in innovation, use of industrial components and production engineering. The target is for companies participating in the programme to invest 0.15% of gross revenues in innovation in 2013, a percentage to rise to 0.5% in 2017, when the new automotive regime comes to an end.
Another two percentage points of discounts will be granted to cars that reduce fuel consumption by 18.8%. Alcohol fuelled cars must reduce consumption from 9.71 km/l to 11.96 km/l. Petrol fuelled vehicles should cover 17.26 km/l. They currently cover 14 km/l, on average.
The professor of the Administration Department at the School of Administration of the University of São Paulo (FEA-USP), Adriana Marotti, says it will be hard for carmakers installed in Brazil to export great volumes of vehicles produced according to the new standards. "In the short term, these cars will remain in Brazil. The focus is improvement of the product sold here. I do not believe that it will help export as the country is still very strong in the production of cheaper cars, the so-called entry vehicles. In the sector, the competition is great.”
Still according to Marotti, exporting cars from Brazil is not a strategy of carmakers, except if the destinations are markets in Latin America. Europe currently consumes more luxury products than those produced in Brazil and the domestic market buys practically the entire production of the factories installed here. Apart from that, exchange rates have great influence in exports of domestic vehicles.
*Translated by Mark Ament
