Automakers scramble for parts to complete cars ahead of new environmental rule

A photograph of the yards of half of the automakers installed in Brazil would show hundreds of cars apparently ready for sale. However, they are incomplete vehicles, which may not reach the streets.

These cars were pre-manufactured in accordance with the sixth stage of the Proconve (Vehicular Emission Control Program), which ends on December 31st. The seventh phase is valid for light models and takes effect the next day. As a result, unfinished models that do not meet the new emission and noise rules will not be able to be completed in 2022.

It may seem like a simple solution, but not quite. Luiz Carlos Moraes, president of Anfavea, (Assembly Association), explains that there are many changes in the after-treatment systems for gases, and some automakers took advantage of the transition to update other components of their cars.

Manufacturers need to send the government the chassis numbers of cars that are in production. Models assembled outside the deadline established by law in this transition of emissions regimes are prevented from obtaining licensing.

About 50% of the companies managed components to finish their cars and are already working on assembling models that meet the new standards. This movement was reflected in last month’s production data.

The manufacture of light and heavy vehicles in Brazil increased by 15.1% in the comparison between October and November, according to Anfavea. The data were released on Monday (6).

“Despite the difficulties, some companies managed to complete vehicles that were stopped in the yards, but the result was well below that of November 2020, with a drop of 13.5%”, says Luiz Carlos Moraes, president of Anfavea.

“We work with great difficulty with logistics and semiconductors, but considering the context we are facing, it was a good month.”

The lack of electronic components will still hamper production during 2022, and demand tends to grow in the automotive industry.

Moraes says that a current car has about 1,000 semiconductors. With the advancement of safety and emission reduction technologies –such as the hybrid options that should reach the market–, this number could reach 2,000, according to studies mentioned by Anfavea.

Cars suitable for the Proconve 6 that are waiting for parts run the risk of being disassembled if they are not ready by the last day of this year. If that happens, its parts will have to be used in the aftermarket or in other models. Each manufacturer will have its specific policy.

In the worst case, incomplete vehicles will be destroyed and have their parts recycled.

The ready models should be distributed by the end of March, being sold normally. In other changes in environmental legislation, such cars were sold at huge discounts between one year and another, but that won’t happen now.

There is a lack of vehicles for prompt delivery and high prices. The consulting firm Bright, specialized in the automotive sector, estimates that the transfers accumulated in the last 12 months resulted in an average increase of 30% in car values.

This escalation is the result of the disarray of the automotive chain, the rise of the dollar and investments to adapt to Proconve 7. Anfavea says that the automakers have already invested R$ 10 billion in this transition.

Moraes says that this is an atypical scenario: nothing similar has occurred in other transitions in environmental legislation.

The increase in production in November resulted in a small improvement in inventories. In early December, cars were available to meet 18 days of sales, with 103,800 vehicles in the yards. At the beginning of last month, companies had 93,500 units available, enough for 16 days of sale.

However, this number is dynamic: with deliveries made throughout the month and the proximity of collective vacations, the volume should fall again in January.

Moraes says that the stoppages at the factories will also depend on logistical issues, “but for sure we will register a lower production number, unless there is a big surprise”.

Anfavea made repeated revisions of expectations. A month ago, it started betting on two different scenarios for production.

The optimistic view considered that, if there was a regularization of the supply of semiconductors, around 570 thousand vehicles would have to leave the factories between October and December. In this way, the year would close with 2.219 million light and heavy vehicles produced, an increase of 10% compared to 2020.

In order for this number to be reached, assemblers will have to produce 186 units this month, which depends on the delivery of parts and the schedule of end-of-year stoppages.

In the most conservative view, production would be 2.129 million units, a growth of 6% compared to last year.

In sales, there was a slight recovery between October and November. 173 thousand units were sold last month, an increase of 6.5% compared to the previous month. The calculation was based on Renavan (National Register of Automotive Vehicles).

Compared to November 2020, there was a 23.1% drop in new car licensing.