Self-owned brand rushes to Brazil: automotive opportunities in the football kingdom
December 15, 2022
These days, the Brazilian World Cup is in full swing. Whether it is a true fan or a pseudo-fan, they may all know that the country known as “God is a Brazilian” has come from world-famous football stars such as Pele, Ronaldo and Kaka, but with the exception of football. What else should Brazil be proud of?
In this country, which is 1.1 million square kilometers less than us, the total population was about 192 million in 2011. The scale of the economy has surpassed that of the United Kingdom and it has become the world’s sixth-largest economy with a per capita GDP of US$12,863, which is more than double that of China. If calculated by purchasing power parity, Brazil has surpassed France and the United Kingdom as the world’s seventh largest economy.
Brazil is a very open country. How open is it? Brazil has adopted relatively loose foreign investment policies since the 1950s, which has attracted a large amount of direct investment from multinational companies. However, long-term “dependent development” has prevented Brazilian industry from being “self-made” so far. Brazil has not owned its own brand of passenger cars. The cars that run around on the streets are foreign cars. They are more completely natural than China.
In 2011, Brazil’s car ownership reached 34.655 million vehicles, which was 30% of the Chinese market in the same period. By 2016, Brazil is expected to become the third largest automobile market in the world after China and the United States. Based on the scale and openness of the Brazilian market, domestic independent brands including Jianghuai, Chery, Great Wall, Lifan and Changan have entered the Brazilian market in recent years. In 2011, Brazil replaced Algeria as the largest exporter of Chinese automobiles. It has always been the most dependent overseas market for independent brands.
According to statistical analysis of the per capita GDP level and car penetration rate in the United States, Japan, and Europe for 60 years, the increase in car ownership with the increase in per capita GDP is a common trend. When the per capita GDP reached 8,000 US dollars, the automobile penetration rate entered the second rising period, with an average of 1 car per 3 people, and continued until the per capita GDP reached 20,000 U.S. dollars, with an average of 1 car per 2 people. According to Brazil's car ownership in 2011, Brazil owns one car per 5.5 people, which is totally inconsistent with its per capita GDP performance. Compared with the current technological barriers in Europe and the United States and non-technical markets, it is easier for independent brand cars to enter the South American market, which has a relatively loose import quota, technology, and market access policies.
The latest industry statistics show that currently, 12 of the 51 brands in the Brazilian automotive market are from China, and China has become the “biggest brand exporter. The Chinese independent brand cars that have come all the way have achieved rapid sales in the Brazilian market before 2012, but with the In December 2011, Brazil’s industrial product tax (IPI) tax rate on imported cars increased by 30%, and Chinese self-owned brand cars that did not achieve local production of parts and components were severely hit.
Taking Chery Automobile as an example, Chery's market share in Brazil has shrunk from 0.63% in 2011 to 0.39% in 2012. Sales volume has dropped by 34.4% from 14,682 units to 14,216 units. To this end, Chery announced in 2011 that Brazil will build a complete supply chain in Brazil in the second year after it will build a production line with an annual output of 150,000 vehicles in Brazil. It hopes its component suppliers will establish a branch near the new Chery plant in Brazil.
Even if the Brazilian auto market ended its decade-long growth in 2013, sales volume decreased by 2% compared to 2012, and it did not stop the enthusiasm of independent brands to build factories in Brazil. Among them, JAC's new assembly plant in Brazil is scheduled to start production in 2015, and will produce 100,000 cars each year. Geely entered Brazil in January this year, selling two models of the Emgrand EC7 and the Global Hawk GC2. The Geely plant in Brazil is also very good. Will soon be put into production; Great Wall had planned to start construction of the Brazilian plant has been delayed until this year; Lifan plans to establish a full vehicle assembly plant in Brazil in the future, direct production, on-site sales.
The logic behind this is that, in 2013, China exported 286,500 vehicles to South America, which accounted for 30% of the total export volume, becoming the largest export market for Chinese automobiles.
Obviously, the Chinese market is not yet operating well. Why do auto brands have to spend huge sums of money to enter overseas markets? The author believes that this is not unrelated to the long-term weakness of the self-owned brand in the country, and this trend is currently becoming increasingly fierce. Since September 2013, the market share of self-owned branded passenger vehicles has seen an unprecedented year-on-year " "Nine consecutive declines," with the escalation of domestic consumer demand and the slowdown of the overall auto market, brand competitiveness is relatively weak and independent brands are more vulnerable. Yin Mingshan, chairman of Lifan Group, once stated that automakers choose to export because Chinese consumers “discriminate” their own brands, and choosing overseas markets has greater value for brand promotion.
Relatively speaking, the exporting countries of self-owned brands are all underdeveloped countries, and there is no special emphasis on quality. There is still a market for self-owned brand cars with low prices. In addition, self-owned brands have built plants in the South American market. With the gradual enlargement of industrial scale, there are also opportunities to use this as a springboard to enter the Canadian and US markets.
However, the author believes that in order to achieve overseas "springboard" in the future, self-owned brand cars must not be re-deployed in the same year when the domestic market is unilaterally exploited and the low-cost and low-quality old roads are based on local market conditions. The model has opened up the market in order to achieve the dual goals of market expansion and brand building.
Take Brazil as an example, many famous automobile companies have set up factories in Brazil, and for Brazil's unique road conditions and personalized consumer preferences, tailor-made for the Brazilian many of the classic models. Domestic common Santana, Volkswagen Gore, Chery Cowin prototypes are from Brazil.
The author believes that with the World Cup in Brazil, automakers in Brazil will definitely launch targeted marketing methods such as "World Cup Special Edition" models, but the marketing methods can only be "accessories", and the key is product technology and strength. Excellent, establish a perfect overseas after-sales service system to ensure that brand awareness steadily increase.
Shenyang Zhongda Huanxin Refrigeration Technology Co., Ltd.
