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Auto Industry in Brazil (Research Paper Sample)


Analyzing the automotive industry in Brazil and relating it to the auto industry in the US

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Automotive Industry in Brazil
Jaguar Land Rover (JLR) has initiated plans to invest 750 million reals in the Brazilian auto market by building a vehicle manufacturing plant in Rio de Janeiro. The company aims to begin the construction process for the new factory by 2016. The proposed factory is estimated to produce approximately 25,000 vehicles each year. Jaguar Land Rover is a subsidiary luxury brand owned by Tata Motor Corporation. Currently, Jaguar Land Rover controls an estimated 53% of the luxury SUV market. Information concerning the Brazilian auto industry will be beneficial information for Jaguar Land Rover and other auto companies intending to invest in Brazil. The major brands for JLR are Freelander, Range Rover Evoque, and Land Rover Discovery.
Brazil Auto Market
Brazil has one of the fastest growing automotive industries in the world. It is the largest consumer market in South America and its auto industry has experienced phenomenal growth over the past couple of years. In 2013, over 3.51 million vehicles were produced representing an increase of over 4.8% when compared to the volume of vehicles produced in 2012 (Datamark Market Intelligence Brazil). The Brazilian auto sector is among the top five largest auto sales market in the world. This can be attributed to increased investment by the global automotive industry coupled with the improving Brazilian economy. These statistics present favorable conditions for Jaguar Land Rover to invest in Brazil.
Over the last 15 years, the volume of foreign direct investment (FDI) inflows into the Brazilian manufacturing sector increased tremendously (Guyette 5). In turn, this has led to an increase in the vehicle production capacity. According ANFAVEA, the automotive industry in Brazil controls 80% automotive market share in South America and accounts for 5% of the Gross Domestic Product in Brazil. The Automotive Manufacturers Association in Brazil (ANFAVEA) estimates that foreign direct investments between 2010 and 2012 amounted to US$11.2 billion.
The automotive market in Brazil is ranked as the world’s fourth largest automotive market. The automotive industry is comprised of 13 agricultural machinery plants, 25 automotive plants, and 12 components and engine plants. The industry has a further 50 industrial units for manufacturing and assembly of automotive parts across eight states within the country. The leading foreign manufacturers in Brazil in terms of market share include FIAT, Volkswagen, GM, Ford, Renault, Honda, Toyota, and Nissan. New automakers such as BMW, Hyundai, Kia, Geely, Chery, and Tata are other global manufacturers that have strengthening prospects in Brazil.
The OEM segment is the most attractive segment in the country because it has experienced strong growth and opportunities over the last few years. Global auto manufacturers prefer the production of OEM products in Brazil because Brazil levies high import tariffs on imported OEM products. Manufacture of EOM products eliminates high tax burdens that could have been incurred if global automakers imported these products from their home countries. The country’s tax calculation procedure is wide and complex because it is subject to a multiplicity of factors that depend on state, municipal, and federal taxes (Roberts 5).
The Brazilian government has initiated several developments in order to attract investment and encourage local production. These developments are also aimed at stabilizing the Brazilian auto market and promoting sustainable growth. The revision of policies and regulations ...
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