MercoPress. South Atlantic News Agency

Weaker demand and Argentine situation hit hard Brazilian auto industry

In January production growth was expected to surpass 2018’s 6.7%, but it will now significantly lag. Domestic auto sales growth was cut to 8.1% from 9% previously

Brazil’s auto industry trade group Anfavea has slashed its forecast for 2019 vehicle production growth to a modest 2.1% from 9% previously, it said on Monday. Anfavea had big plans this year for Brazil’s auto industry, which has been slowly recovering from a significant slump.

In January it said it expected production growth to surpass 2018’s 6.7%, but it will now significantly lag that rate. The trade body also cut its forecast for Brazilian domestic auto sales growth to 8.1% from 9% previously.

It also revised down its outlook for auto exports, which, hurt by an economic crisis in Argentina, have weighed heavily on Brazilian automakers.

Anfavea now forecasts a 33.2% drop in exports from a July forecast of 28.5%. At the start of the year, Anfavea had only expected a 6.2% drop for 2019.

“It’s been really hard to forecast exports to Argentina, and we are going to remain conservative there, “ Luis Carlos Moraes, Anfavea’s president, told reporters.

Brazil was one of the world’s five largest auto markets until a recent downturn in 2015-2016, and has struggled to recover to previous levels of production and sales despite significant growth.

A 2.1% production growth rate this year would be the weakest since 2016, when output contracted. The country once again flirted with recession during the first half of the year, weighing negatively on manufacturing across the board.

Auto industry employment fell 3% in September compared to a year ago, Anfavea said, pointing to Ford’s decision to shut down a plant in Sao Paulo state as the biggest contributing factor.

Moraes said the macroeconomic situation in Brazil had affected the forecast revisions. Automakers in Brazil now expect to make 2.94 million cars this year, down from a previous forecast of 3.14 million.

They expect to sell 420,000 units abroad this year, down from 590,000 previously. Meanwhile, domestic auto sales are seen at 2.8 million, down from a forecast of 2.86 million units.

Anfavea released its new yearly forecast at its monthly press conference, where it also disclosed monthly production and sales numbers, which also fell. September automobile production slid 8.3% from August, with sales dropping 3.3%, Anfavea said.

Brazilian automakers produced 247,300 new cars and trucks last month, while sales totaled 234,800 vehicles, Anfavea said. Compared with a year ago, auto output was up 10.9%, with sales increasing 10.1%