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Brazilian Car Manufacturers to Halt Work at Plants Due to Coronavirus Outbreak
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2020-03-18
          According to the National Car Manufacturing Association of Brazil (Anfavea), Brazilian car manufacturers may be forced to halt production by the end of March or the beginning of April due to the short supply of Chinese auto parts impacted by the coronavirus outbreak. As China represents around 13% of Brazil’s total auto parts imports, Brazilian companies have taken necessary measures to avoid possible impacts (i.e., import by air cargo or adjusting the manufacturing speed). On the other hand, Chinese auto parts suppliers said that their production has gradually returned to normal. According to Anfavea, some other countries have also taken measures (e.g., interest rate reduction) to offset the economic loss caused by the pandemic. The Central Bank of Brazil may also further reduce its basic interest rate (“Selic”). However, Anfavea also noted that though the rate of “Selic” may hit a new low in its history, if other local banks do not reduce their rates too, the market still cannot be benefited. As a result, Anfavea also called for the Brazilian Government to reduce its IOF tax, which would cause greater effects on the automotive market. Anfavea also noted that the currently appreciating USD did cause a huge impact on the industry as the cost for imported components became higher. For example, should the exchange rate of USD to BRL increase from 1:4 to 1:4.6, the cost for manufacturing a car will be increased by BRL 2,600 on average (around USD 650).  
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