How Bad Is Brazil Car Market? Drop Equals All of Mexico's Sales

  • Trade group chief sees decline of 1.3 million vehicles in 2015
  • `Worst year ever for the sector,' Assumpcao says in interview

Brazil’s car dealers expect 2015 sales to plunge by 1.3 million vehicles, a decline as big as Mexico’s auto market, as economic and political turmoil pummel the South American country.

“It’s been the worst year ever for the sector,’’ Alarico Assumpcao, president of the Brazil Car Dealerships Federation, said in an interview. “The country needs to move on and now it is halted. Actually, it is walking backwards.’’

The pullback underscores how low-income consumers are finding it harder to get an auto loan in Latin America’s biggest economy. With unemployment in Brazil at 7.9 percent, inflation above 10 percent and interest rates high, banks have been wary of lending to consumers who may have trouble making payments.

The upshot: 935 dealers shut their doors this year through November, resulting in 31,450 jobs lost, with an additional 165 showrooms in the process of closing over the next few months, Assumpcao said in the interview at Bloomberg’s Sao Paulo office. The picture will get grimmer if the political climate remains unsettled, possibly wiping out 3,000 more dealerships next year, he said.

But the auto market is likely to stabilize as the country’s direction clarifies following an expected vote in Congress early next year on whether to impeach President Dilma Rousseff, regardless of whether she stays in office, Assumpcao said.

Incentive Program

Dealers also could get a boost if the government fashions a plan to give consumers incentives to upgrade their vehicles, Assumpcao said. The average car in use is 12 years old and the typical truck is 20, he said. It would be a positive move from a government that hasn’t impressed him so far.

“Until now, with all due respect, they got it wrong more often than they got it right,’’ Assumpcao said. Fenabrave, as the trade group is known, expects sales to start recovering after next year.

In 2017, Assumpcao said, “it is as if we get out of intensive care and go to a hospital bedroom.’’