The (partial) decline of Brazilian car manufacturing

Over the past decade Latin America has been one of the most exciting markets for global car giants.

The sharp economic slowdown has diminished the region's attractions to some extent, but as shown by a recent research report by LatAm Confidential, an FT research service, the picture is far from universally bleak. While sales have slumped by a regional average of more than 10 per cent since 2014, there have been sharp national variations.

In particular Mexico and to a lesser extent Colombia have seen steady increases in sales. In Mexico's case, exports bound for the US rose 15.2 per cent year on year in the first quarter, with the industry attracting billions of dollars of investments in new plants.

In recent months Ford, Toyota, Nissan, Audi and BMW have announced more than $6bn in new commitments. Mexico's domestic market remains much smaller than that of Brazil but it has been growing rapidly, with sales of cars rising 21.9 per cent year on year in the first quarter.

One of the reasons is that credit is becoming more widely available, with the carmakers themselves taking the lead in offering loans.

Nissan, for example, launched a programme targeting workers in Mexico's sprawling informal sector earlier this year

Mexican buoyancy contrasts with a contraction in Brazil, where sales fell 13.1 per cent between January and March.

With export potential constrained by the recession in Argentina, Brazil's biggest export market, output is falling too, and car manufacturers have cut about 17,800 jobs since November 2013.

Sales have also been falling at an accelerating rate in Venezuela, Chile and - until recently - Argentina.

However, even in the south there are some chinks of light.

First, there are some signs that the decline may be levelling out to some extent.

In March, Peru's sales were roughly the same as a year ago, for example, and after several months of double-digit deterioration, sales in Argentina actually increased.

Hopes of a more stable economic management in Buenos Aires following elections in October (in which the incumbent leftwing populist president Cristina Fernandez is unable to stand) have even attracted some investment, with Nissan announcing a $600m investment in a truck plant earlier this month, the first new commitment in the country's industry for some years.

Second, in Brazil - by far the region's biggest industry and market - not every company is doing badly.

Certainly, older, more labour-intensive operators such as Volkswagen that have factories in the long-established and heavily unionised ABC industrial belt to the south of Sao Paulo have been hard hit. But relative newcomers such as Honda, Hyundai and Toyota have fared better, partly because their plants are more mechanised.

And although some investments are being put on hold, several companies are pressing ahead with expansion plans.

Fiat Chrysler is scheduled to open this week a R$7bn (US$2bn) new factory in the northeastern state of Pernambuco, where it will manufacture its Renegade jeep.

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