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Brazil Must Raise Safety Standards Before It Raises Its Car Exports

by Roger Lanctot | Jun 11, 2013

(This commentary was written at the request of and published simultaneously by AutomotiveWorld - http://tinyurl.com/lfxm4jf)

Brazil is known for its activist government, particularly when it comes to the country's economy.  Brazil's government has an impressive track record reversing its economic misfortune and runaway inflation.  But Brazilian consumers now must take the bad with the good, meaning taxes are high, as are the prices of cars, even in the absence of competitive safety systems and quality construction.

As the world's fourth largest car market, seventh largest producer of cars and one of the fastest growing car markets, Brazil faces opportunities and challenges.  Brazil sees an opportunity in leveraging its burgeoning automotive influence to become an exporter of cars.  But before it can export it will have to bring the quality and safety of its cars up to par.

According to a report in just-auto, Luiz Moan, the new president of Anfavea, Brazil’s automotive lobbying group, is seeking to restore Brazil’s auto exports to 2005 levels or higher.  Exports of cars have plunged by nearly 50% since 2005 as Brazil’s economy has strengthened, along with its currency.  Just-auto reports that Anfavea’s goal is for 5M in domestic sales, 5M in domestic production, 1M exported and 1M imported – with the import target slightly exceeding 2005 import levels.

Brazil’s government clearly regards its swelling automotive market as a strategic asset and, true to form, has sought to both protect and stimulate it – reducing industrial taxes in the past year and imposing a harsh import duty late in 2011.  The tax initiative had some positive impact in maintaining growth and the import duty brought immediate commitments from importers (ie. BMW, Hyundai and multiple Chinese importers) to open new factories or expand existing facilities.

Brazil is still struggling to come to terms with high rates of vehicle theft, stifling traffic conditions and increasing highway fatalities.  Brazil has surpassed the U.S. in the number of annual highway fatalities as well as the rate per miles driven, cars owned and per 100,000 citizens.

Brazil is hoping to combat the plague of vehicle theft by instituting its Contran 245 mandate for fitment of a vehicle tracking and immobilization device in all cars, trucks and motorcyles by the end of calendar 2014.  Management of traffic has been left to municipalities which are in the very earliest stages of developing sophisticated traffic management schemes. 

Sao Paulo has made the most progress in implementing RF technology for tolling and instituting a license plate number-based scheme for limiting vehicle use.  More clearly needs to be done and Brazil’s government is not likely to sit idly by.

Perhaps the saddest footnote to the tale of Brazil’s automotive market emergence, though,  is the rising death toll on the nation’s highways – now well surpassing the 100 fatalities/day seen in the U.S.  A report in the Huffington Post (http://tinyurl.com/mnyln6w), points to a lack of safety standards (airbag and anti-lock brake requirements coming next year!), a lack of testing facilities, a lack of consumer awareness and poorly regarded local build quality.

If Brazil is to fulfill the opportunity of becoming one of the leading auto markets in the world – not only consuming cars but building and selling them – the quality and safety of the cars made in Brazil must improve.  And this change must come even before exchange rate and other challenges are overcome.  In the end, the first to benefit from those improvements will be Brazilians. 

It will also help make Brazilian vehicles more welcome in local export markets which are no less protected than Brazil’s own.  If Brazil can establish safety leadership for the region, Brazilian cars might become attractive imports for Venezuela and Mexico, rather than being seen as inexpensive “deathtraps,” as they are perceived today.

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