Brazilian July vehicle production sinks to lowest level in 18 years – Anfavea

RIO DE JANEIRO, BRAZIL – Due to the shortage of electronic components in the assembly lines, the production of vehicles – totaling 163,600 units last month – fell 2% in July compared to June.

The result announced today by Anfavea, the organization representing car manufacturers, includes passenger cars, light SUVs, trucks, and buses.

It was the lowest July in vehicle production in 18 years. Since the beginning of the pandemic, in consecutive months, last month’s production is only above the volumes produced between April and June last year, when the arrival of Covid-19 ground to a halt the entire automotive industry.

Compared to July 2020, the total production in the sum of all categories fell by 4.2%. Thus, the first seven months of the year, in which 1.31 million units were produced, ended with a growth of 45.8% compared to the same period last year.

The shortage of parts, which is even more serious for electronic components given the global shortage of chips, forced assembly plants to suspend production again last month. Currently, work stoppages continue at Renault and General Motors (GM) plants and at some Fiat and Volkswagen plants.

As a result, dealers are short of models. Although consumer demand is present, vehicle sales decreased by 3 8% from June to July due to limited supply.

A total of 175,500 units were sold in July, a volume that, with a slight increase of 0.6%, practically reaches the volume of the same month last year, when the market was still suffering from the effects of the pandemic.

The volume sold (1.25 million vehicles) from January to July was 27.1% higher than that accumulated in the first seven months of 2020.

For exports, whose main destination is Argentina, the balance for the month is also negative, with a decrease of 29.1% compared to June and 18.4% year-on-year. Automobile manufacturers delivered 23,800 vehicles last month, bringing the total since January to 223,900 units, a growth of 50.7%.

Anfavea’s report also shows that the vehicle industry created eight new jobs in July – in other words, stable employment – ending the month with 102,700 employees.

As has been the case since last January, Anfavea has not published figures for tractor and construction machinery manufacturers, which are also members of the association. The reason: revision of the entire statistical series after John Deere left the association.

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The vehicle stock in the warehouses of car manufacturers and dealers decreased from June to July from 93,000 to 85,100 units. The total is now enough for 15 days of sales, less than the 16 days of a month ago.

As in February and April, the inventory is again at its lowest level in 20 years according to the criteria of turnover time, according to Anfavea, the organization that represents the vehicle industry.

Presenting the July report, Anfavea President Luiz Carlos Moraes argued that the industry should continue to operate with adequate inventories until normalization of the supply of semiconductors, whose global shortage is crippling automakers. This is not expected to happen before the end of the first half of 2022.

“I don’t think inventories will change significantly in a short period of time,” Moraes said. “We have huge cost pressures, a recovering market, but a lack of production.”

Anfavea’s president also presented comparative data Friday showing that consumption in the used car market is diverging due to price increases. Cost pressures are being felt due to adjustments in materials such as steel and a shortage of models at dealerships. These are challenges for the automotive sector.

Due to supply constraints, the daily average of vehicle sales in July fell to its lowest level in a year: only 8,000 units.

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