Auto parts industry could benefit from weak real
The real's weakening against the dollar could benefit the Brazilian auto parts industry. The higher costs to import components will likely force automakers to raise the local content of vehicles. But Dan Ioschpe, the head of Sindipeças, which represents parts manufacturers, believes this stimulus will fail to drive the domestic industry if it is not ready to follow the evolution of automobiles and make here items the automotive industry buys abroad now because the domestic market is unable to supply them.The unfavorable environment for imports comes as this sector has already begun to prepare to take advantage of tax stimuli offered in an automotive program launched by the federal government in late 2018. The so-called Route 2030 program provides for a reduction in the amount of Income Tax and Social Contribution over Net Profit (CSLL) for vehicle and auto parts makers that invest in research and development. The benefit can be added to so-called Lei do Bem (Good Law).
A total of 46 auto parts companies have enrolled in the program since it was launched, according to data from the Ministry of Economy. The list includes multinational companies such as Dana, Delphi, Valeo, Eaton and the Brazilian giant WEG. But there are also manufacturers of lower-end items that need to evolve as vehicle technology improves.
German company Robert Bosch, the world's largest parts manufacturer, is leading investments in items for the electronic part of the vehicle - systems aimed at new energies, such as electrification, and infotainment, which aggregates information and entertainment devices. In some cases, connectivity equipment is still imported.
The Sindipeças's head does not usually talk about Iochpe-Maxion, the company his family founded 100 years ago. But in a recent interview, CEO Marcos de Oliveira reported several innovation projects are being developed through Route 2030's tax stimuli. Iochpe, which owns research centers in Brazil and abroad, has been testing new materials such as carbon fiber and plastic to reduce the weight of the wheels it produces. Lighter wheels will be vital for the good performance of electric cars.
Today, around 70% of the auto parts revenue comes from sales to automakers. Of this total, 66% represent items that go directly to the vehicle assembly lines and 4% are the intra-sectoral slice - sales between suppliers, which, in any case, goes to automakers. By law, vehicles made in Brazil must have at least 60% of national...
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