Vehicle production collapses in January, with omnic and collective holidays

The year begins with a sharp drop in the production of light and heavy vehicles. According to Anfavea (association of automakers), the 145,400 units manufactured in January represent drops of 27.4% compared to the same month in 2021 and 31.1% compared to December.

The factors that determined the outcome go beyond parts supply issues: they also involve the effects of the omicron variant and the change in environmental legislation.

Luiz Carlos Moraes, president of Anfavea, says that the removal of employees due to Covid-19 did not stop production, but there was a reduction in the pace of the assembly lines. The worsening of the health crisis occurred during the collective vacation period, which increased the contamination.

And these vacations were atypical, held in January. The automakers needed to speed up production in December so that their cars could be completed before the seventh stage of Proconve (Vehicle Emissions Control Program) took effect, and so they delayed the traditional end-of-year stop.

The rule provided that light cars made from January 1st should emit less pollutants than models assembled in 2021. The companies sped up manufacturing to try to get around the problem, at the same time as they tried to gain more time.

In the end, the timeout was granted. Ibama (Brazilian Institute for the Environment and Renewable Natural Resources) extended the period for adapting new cars to the new stage of environmental legislation by three months. Companies will have until March 31 to complete the unfinished cars.

Excessive rains were also identified as a harmful factor for trade and vehicle production in January. There was also the implementation of the new Renave (National Registry of Vehicles in Stock) — which, although reducing bureaucracy in the sector, required adjustments that delayed the launch of new vehicles in the system.

With the slower pace of production, there was an impact on license plates. 126,500 units were sold last month, with an average of 6,025 cars/day, according to Fenabrave (entity that represents distributors). The result includes passenger cars, light commercial vehicles, trucks and buses. Compared to January 2021, the fall recorded is now 26.1%.

All this movement should be reflected in the industrial GDP, which increased by 3.9% in 2021 compared to the weak base of 2020, according to the IBGE (Brazilian Institute of Geography and Statistics). Despite the bad start to the year, Anfavea continues to bet on the rise of the transformation sector in 2022.

“We can’t lose more, we plan to grow this year even with the restrictions”, says Moraes. The entity projects a growth of 9.4% in the production of light and heavy vehicles this year, with 2.46 million units manufactured.

Anfavea also believes that GDP will grow 0.5% in 2022 compared to the previous year, a number that seems optimistic in the face of the difficulties of the moment.

“Some economists even talk about a drop in GDP in 2022, but the automotive sector has a relevant impact and can pull the industrial chain”, says the president of the automakers association.

The problems, however, are not limited to productive issues. The rise in the Selic (basic interest rate) – which rose 1.5 percentage points last Wednesday (2) and reached 10.75% per year – puts pressure on the financing sector, which is responsible for around 60% of sales of vehicles in Brazil in the last 10 years.

If raising interest rates is a remedy to hold consumption and, consequently, reduce inflationary pressure, the automotive sector is not following the recipe.

According to KBB Brasil, a consultancy specializing in car pricing, the 10 best-selling models in the country accumulated an average increase of 25.4% throughout 2021. kilometer.

The increases are attributed to factors such as lack of components, higher prices for inputs and exchange rate variation.

On the global stage, Brazil is one of the countries that lost the most sales at the beginning of the year, says Anfavea. The US, for example, recorded a 9.8% drop in licensing between January 2021 and 2022. In Japan, the retraction was 14.2% in the same period.

According to Anfavea, the pace of sales shows signs of improvement in February, although deliveries continue to be hampered by difficulties in maintaining the pace of production. The normalization of activity in the sector should only occur between the end of this year and the beginning of 2023.

Until then, fluctuations in inventories should continue. Moraes explains that, if we consider the pace of sales in December, the current stock would be enough to cover 17 days of sales.

But if the basis of the calculation is the result of January, there are enough vehicles for 27 days of sales. Considering the market movement in early February, the first number is more realistic.