In my recent reviews of entry-level cars in Brazil (VW up! and Fiat Uno), I spoke of how these new cars are adding technology to confront newer cars sold in the category immediately above, that of the midlevel compact (Ford Ka). Entry-level car participation in the market is under such pressure, that there are few launches aimed directly at that segment, while the midlevel compact has received a plethora of novelties.
As the podium in September is fraught with new names and new competitors keep jumping into the fray, even though YTD sales have slowed 9% to a total of 2,404,032 vehicles, now is an interesting time to analyze what has changed in the Brazilian market and consumer.
For years the top three spots were Volkswagen Gol, Fiat Palio and Fiat Uno, with little variation, being that sometimes a Chevy Celta or Corsa would manage to snag 3rd place. In common, these models shared the fact that they were de facto entry-level cars with the minimum required by law and as bare bones as could be (power nothing, cold air, are you kidding?). This year the market has suffered a whirlwind. Top three most sold cars in September were Fiat Palio, Fiat Strada and Chevrolet Onix. The Palio compromises two cars: the old Palio Fire is still an entry-level car, while simply “Palio” refers to a firmly midlevel compact. Strada and Onix are also firmly midlevel compacts and priced as such.
What happened? It is my estimation that the reasons for this monumental change are threefold.
Reason number 1 for the change was altered government policy (bless them!). As of the end of last year, all cars in Brazil must come with ABS and double frontal airbags. This led Volkswagen and Fiat to trim their lines and kill off perennial best sellers as updating them through retro-engineering proved expensive. Volkswagen did away with its Gol G4. The Gol G4 was a direct descendent of the first Gol launched in the 80s and sported such antiquities as a north-south engine layout. Due to pricing and fleet sales, that Gol sold as much or more than the much more modern Gol G5 (and now G6) still on sale. Besides the name, nothing else was shared between the two cars. In fact, the Gol G4 was an absolute entry-level car and the G5 and now 6 are firmly midlevel.
Fiat did a similar number and terminated its Uno Mille car. In design and mechanically very similar to the early 80s-launched Uno, it was a survivor. Now only the new Uno remains. Like the Gol, the new Uno uses a new platform and shares nothing with the old one. However, as Fiat used to lump old Uno Mille and new Uno sales together, the Uno nameplate sales has taken a beating and is now only the 6th most sold car in the country.
The second factor is the maturation and segmentation of the Brazilian compact car market. This is reflected in higher transaction prices and better equipped cars. Besides the mandatory airbags and ABS, most private buyers will only buy cars equipped with 4 doors, air conditioning, power steering, electric windows and locks. Makers usually throw in, depending on trim level, such enticements as multimedia centers, as extra dollop of chrome, rain and darkness sensors, and other wow-me technologies. This has created a second category in compact cars, somewhat above the one in which the so-called entry level cars (Uno, Palio Fire, up!, Celta compete). In it are cars like the Chevy Onix, new Ford Fiesta and Ka, Fiat Palio, Hyundai HB20, Toyota Etios, Renault Sandero. This segment has grown 11% compared to 2012, while entry level cars have decreased 34% in the market.
Some makers have even abandoned the entry level sub-segment altogether. Toyota and Hyundai do not compete in it. Fiat’s new Uno is trying to abandon it. Volkswagen’s up! firmly straddles the line between entry and mid-level, tending towards the latter. Ford does not compete in the basest segment, choosing to offer the Ka only as a midlevel offering and the Fiesta in an even higher compact sub-segment, that of the premium compact.
Another segment that competes directly with entry-level cars and takes away from their sales numbers are compact sedans (Fiat Grand Siena and Linea, Nissan Versa, Renault Logan, VW Voyage, Chevy Prisma and Cobalt, Honda City, among many others). Though there are still two entry level sedans (Chevy Classic and Fiat Siena Fire), midlevel sedans are the ones which receive investments and the segment has seen a multitude of recent launches. In comparison to year 2012 levels, the compact sedan category has grown 11%.
A bit more expensive than the sedans, but still derived from compact cars, there is the compact CUV phenomenon. Being the Ford EcoSport and the Renault Duster the two main names in the category, sales have grown 12% since 2012, even managing to grow sales in comparison to the much better year in sales of 2013 (6%). Almost 217 thousand compact CUVs have been registered in Brazil this year.
Riding a similar wave as the CUVs, small pickups grow in popularity year over year. In 2014, the market has grown 5% over 2013 (even though the general market has fallen 9%) and comparing to 2012, there are now 10% more pickups sold every month. This has lead to such phenomena as the Fiat Strada and Volkswagen Saveiro being offered in single, extended and even double cab configurations. In February of this year the Strada was the most sold car in Brazil, the first time ever a pick-up won the sales crown. Underscoring its success, September 2014 will go down in the books as the Strada’s best month ever so far in its history. Fiat sold over 14 thousand of their little trucks in that month alone.
As a result of all of this, entry-level cars are down 34% since 2012. Two years ago almost 725 thousand entry-level cars found a home. Now that number is closer to 480 thousand.
The third and final reason is the continuing prosperity of Brazilians. More Brazilians than ever can afford brand-new cars, and though the market is down as the whole country holds its breath over the end of the election period (and businessmen make use of the opportunity to withhold investments and nose voters in the direction of their interests), the Brazilian real still stretches more than before and can now buy more car for relatively less than ever.
All of this results in a market markedly different from a year ago. Safer, more equipped cars are reaching consumers’ hand. Though most sales still rest squarely in the compact territory, it will be interesting to watch if the entry level is abandoned, or should the economy hiccup its way into malaise, if entry-level cars will again find favor in the market. Projecting for the future and analyzing current trends, it seems logical to say that the new Brazilian consumer is here to stay and makers now adapt to his needs and offers him more in order to keep him happy.
Happy confluence indeed!
But, but where will old platforms go to die?
Not here apparently. Though we still have to make do with some of that, it’s been a while since that was a common occurrence. Maybe they’ll go Thailand, ;)…
Can we have the Ford Troller, please, please oh, pretty please :)
Ask Ford!
@Marcelo,
Brasil will getting these hopefully in 2015.
It’s unfortunate that the US is again left out of the loop in the global market.
But, let’s not forget Ford great vision of One Ford…….if it’s not the US.
It will be the closest size Ford SUV to Bronco. They have 4 doors, but will off road far better than a Bronco and designed in Australia.
Vehicle, from the front;
http://01t1.com/wp-content/uploads/2015-Ford-Everest-2.jpg
Interior;
http://www.newcarsrelease2015.com/wp-content/uploads/2014/03/2015-Ford-Everest-SUV-Interior.jpg
Article;
http://www.goauto.com.au/mellor/mellor.nsf/story2/D21A683EA11B024ECA257D32000B4B0F
Let’s work on getting a Bronco first. I’d like an Expedition SVT Raptor as well.
Well, many have likened the Troller in appearance and essence to the original Bronco, so there is that.
True, but in the US, we have a better chance getting something that is based on the F150 instead of a smaller truck.
From ’78-’96 the Bronco was a full size truck/SUV. I’d love a Bronco based on a shortened wheelbase version of the new F150. They could get it under 4000 lbs with the V8. I want.
I remember those late 70s early 80s Broncos well. In red and white, quite dashing. Always insisted with Dad to get one, to no avail. kids, what do we know, ;)!
We had a Ramcharger, but the Bronco and Blazer were always better. My dad worked as a salesman at a Crysler dealership while he was healing from a work accident on a construction site. He bought a leftover Ramcharger that sat for almost a year after the ’94 Ram was released.
He really liked selling trucks to contractors, but hated the rest of the car sales business. He didn’t want to sell anyone a Colt or Shadow. I remember using the interior panel gaps of his demo Shadow to store magazines, a deck of cards, and food on longer trips.
“Let’s work on getting a Bronco first. I’d like an Expedition SVT Raptor as well.”
Wow, very cool…
Looky:
http://newcarsvie.com/wp-content/uploads/2014/09/2016-ford-bronco-pictures.jpg
Jeez… could I just run over some bad people with those tires? Then I’d give it right back.
After I hosed it off, of course.
@bball40dtw
A little off the subject, but what truck/SUV product do you like MY90-05 and why?
Ryoku and I are having a conversation about it and I’ve already shared my limited knowledge on the subject.
Truck of SUV? 4 door or 2 door?
I love the GMT400 Yukon GT. That thing still looks bad as hell when I see them. I also really like the 90s Broncos.
I’ve owned a ’93 Ramcharger, ’98 Ram 1500, ’90 Ram 2500, ’89 Ranger as personal vehicles and had all the fullsizers of that era as work trucks.
If it’s a truck I a buying, I would probably buy the cleanest 2004-05 F150 I could find. I find the eleventh gen F150 to be a fantastic truck.
It’s hard for me to pick one truck of that era. I’ve driven so many and I like most of them.
I asked my dad, because he’s put over a million miles on that era of trucks. He loved his 1998 Ram 1500. He said the F150 was the best of the work trucks but was always more expensive than a Chevy.
@bball
Thanks man I’ll pass it along (I don’t think the number of doors or type mattered as much). I know a bit about trucks from the dealer (and repair) standpoint, but not the ownership or “best to own” standpoint. I would personally lean toward SBC or 4.3 V6 late 90s GM truck as clean as I could muster, but that’s only due to my familiarity/comfort level with GM of the period.
“I would probably buy the cleanest 2004-05 F150 I could find. I find the eleventh gen F150 to be a fantastic truck.”
5.4L 3V? O.o
No thank you.
28-
We had good luck with the Silverado with the 4.3L. I can recommend it without reservations.
Danio-
Wasn’t the 4.6L available on the 04-05 trucks? I’ve had good luck with the 4.6L in trucks.
Re: the panel gaps in older vehicles:
My father and grandfather always like the loose fittings of their pickup trucks because then they could stick notes in. You’d open the door on a windy day and be greeted with the flutterings of various bills needing paying, checks needing cashing, or scribbles of “get twine, Hy-Gard oil, new filters,” etc.
@danio: what exactly is wrong with the 3V 5.4? We’ve had ours for 6 years now with no problems, and we run it on (gasp!) E-85.
Last stop, Africa.
“small pickups grow in popularity year over year”
Oh, no… what’s that dust cloud on the horizon? I think I hear screaming… sounds like “Aii yii yii yii yii…!”
Like every other country on earth, Brazil will come to regret its decision.
No one ever complained about poverty-spec VW Beetles because the Beetle was designed to give the featureless cabin a sort of spartan elegance. As regulators require more safety equipment and they design new crash tests such that no existing model can pass with good marks, the manufacturers have to offset regulatory cost with features, gimmicks, options-bundling, and infotainment junk tech.
What happens when someone purchases the affordable entry-level version of a new vehicle? They find an overwrought cabin, flooded with cheap plastic because its designed to hold $10,000 worth of extra features. The interior and exterior are also beaten mercilessly with an ugly-stick to force customers into more expensive trim levels that help the manufacturer offset the cost of regulatory compliance, and meet the earnings expectations of investors.
Instead of enjoying a mature technology with declining real costs, drivers are basically forced into vehicles with flat real costs or rising real costs, which isn’t how consumers want to spend their money. If you don’t believe me, look how silly-loose credit has become to maintain US SAAR. Young drivers are cut out of the market, too.
The worst part of all is that most new safety equipment has very weak correlation with passenger safety. Fatalities are falling rapidly in developed nations due to seat-belt usage and adoption of public transportation. The regulatory madness is driven by protectionism and insurance companies who want to dump actuarial costs on the customers via MSRP, without raising their premiums. It doesn’t really help the customer in the long run. The signaling games consumers play with one another by purchasing certain trims or brands are equally useless.
Don’t really agree. As the baser cars improve, and yes, become comparatively more expensive, what I see is more people adopting them. The Focus hatch and Golf category has been really squeezed by the bigger and better compacts of today as many realize there is not that much difference between a Sandero and a Golf. The added safety equipment is a need, sure, insurance companies have a hand, as does the government, but in a market that seemingly only goes forward under the whip as businesses are loathe to give up any fraction of profits, I think most feel better off nowadays than before.
Nobody ever complained about poverty spec Beetles because
– poor people were happy to have a car
– people died in 20 MPH fender benders before they could complain
Id love to see your proof that fatalities are down due to seatbelts and public transportation than to advances in safety design as well.
Hey sportyaccordy, very true. I have seen that here, in my lifetime. Most people here (and not only poor, as really poor people have only recently started buying cars in any number) were just happy to have a car. Now I hear and see a lot of people picking and choosing, and not just in the better off classes. That is significant. Though still strapped for cash, it does seem a larger number than ever do have the means to choose, really choose, something closer to their true aspirations.
Safety is interesting, too. I really thought Latin NCap would not catch on. Seems it has and I hear the word safety uttered more and more by car shoppers in this country.
Things do change. Amazing really.
“The worst part of all is that most new safety equipment has very weak correlation with passenger safety.”
The truth is the exact opposite of this.
You might want to actually look at the research prior to commenting.
Don’t rush into Waterloo, Napoleon.
One of the strongest macro correlations is declining vehicle occupancy. In other words, bad drivers are killing fewer passengers. However, like airbags and other safety equipment, some macro trends don’t play out locally. Seat belt macro trends do work, though, at the local level. So does spending on road barriers for highways and rural roads.
Airbags, crash tests, rear view cameras, etc are mainly statistical noise. Whatever statistical significance they had in their infancy, has long since evaporated, and that’s why we have click-it-or-ticket.
That was word salad. Utter drivel and empty calories.
The subject is well researched. There’s no doubt that airbags substantially reduce fatalities. Your denials don’t change that.
Lol, good call, Pch
Frankly, I’d like to see credible sources from both of you.
You don’t understand why national regulations, like airbags, would need to have proportionate correlation at the local/state level? That’s a word salad concept full of empty calories?
DC has the lowest fatality rate in the US, including fatalities per vehicle mile. Why do you suppose that is? because they have more airbag regulations, crash tests, and backup camera mandates than the rest of us? DC has no rural highways, high seat-belt usage rates, and it is the pilot location for many national road safety systems. Those trends play over time as well, locally and nationally, but why am I telling you? You already know these things.
National airbag regulations do not have proportionate impact at the local level, nor do they correlate as closely with falling fatality rates as seat belt usage, rural highway lane miles, or road safety implementation. Airbags don’t do as much as we imagine. Is that simple enough?
@drzhivago138
The story of airbag implementation is more interesting. Air bags were slated for Jan 1973 implementation, but NHTSA backed off because they couldn’t enforce usage of seat belts, which were mandated in 1966. In the early-80s, insurance companies wanted to weasel out of claims by making customers buy air bags. They sued the NHTSA and won, but again they were rebuffed when NHTSA struck a deal with auto manufacturers, promising to delay new airbag mandates, if 2/3 of the states would enforce seat belt usage by the end of 1989. Despite achieving the objective, the bargain was struck down, and airbags became mandatory (1989 for cars, IIRC, and mid-90s for light trucks). Even after airbags, the NHTSA kept pushing harder than ever for seat belts usage via click-it-or-ticket. Each year we set new records for seat belt usage and new post-war lows for fatalities.
Furthermore, the US has about 17,000 single-vehicle fatalities per year. About 70% are run-off-road crashes, which correlate strongly to two-lane high-speed-limit roads in rural areas with no lighting. Approximately 1/3 of the US’ 33,000 fatalities per year are run-off-road-crashes that have virtually no correlation with airbags or seat belts. Run-off-road is the other major factor, along with seat belts, that determine US fatalities.
http://www-nrd.nhtsa.dot.gov/Pubs/811232.pdf
“DC has the lowest fatality rate in the US, including fatalities per vehicle mile. Why do you suppose that is? because they have more airbag regulations, crash tests, and backup camera mandates than the rest of us?”
This statement displays an utter lack of knowledge of the math behind statistics.
The issue at hand is not fatalities in one jurisdiction versus another, but fatality rates when there is safety equipment versus fatality rates without safety equipment.
Airbags have been studied extensively. You obviously haven’t read the research; then again, you probably wouldn’t understand it even if you did.
When I see Brazilian prices for cars and the features (2 airbags being pointed out as special) I’m really glad to live in a relatively free trade country. At least in comparison to Brazil.
Yes, but when prices are comparatively lower than before in terms of price/equipment levels, and airbags were a rarity in small cars even a yer ago, the present Brazilian consumer is not really feeling too left out.
Well, but from your articles I take it a car that may cost $15K in the US cost about $30K in Brazil accounting for features. throw in likely lower wages and it looks like cars are relatively expensive.
so the consumer kind of is left out financially.
Well, the same car cost 13k a year ago and didn’t have airbags and abs. And for 15k USD you’ll likely take a car with the minimal requirements mentioned in the text thrown in. Yes, enthusiasts all complain here, too, but for the last couple of years, and in this compact segment, there are options for all sizes of wallets, types of cars, level of sophistication, finishing and size. Pricing is still an issue here, but in the compact category, the extra equipment and even valuation of the dollar, not so bad compared with some other markets, though yes bad compared to US. The more expensive the car though, the greater discrepancy between internal market price levels and international ones.
I’ve see it happen in many markets and for many products. When the item is relatively scarce in a market, then entry level products have a market. Once the item becomes more commonplace, and the used market develops, price sensitive consumers buy used, and less price sensitive consumers buy new.
In the US, I’ve seen that in the recreational vehicle market. The market for new lower priced motor homes disappeared once enough used motor homes became available, I imagine the same is true of the Brazilian auto market. It’s also why cars like the Mitsubishi Mirage will not make much of a dent in US auto sales, consumers will mostly opt for a used Sentra or Mazda 3 rather than a new Mirage.
That is true and there is certainly an element to that. It used to be that cars were so difficult, and inflation high, that a brand-new car could be sold after a year for more than one bought it. That was 40 years ago. 20 years ago when the present growth spurt began in earnest, secondhand car prices dropped fast. Now, they have been holding relatively steady and cars keep their value better than in other places. So much so that the first car is almost always the most difficult to get. One thing though that favors brand new cars in Brazil is credit. When financing a used car, rates are double or more of a new car, so to many it doesn’t make sense. The market is maturing, but we still have a ways to go.
It’s so good to see a Country’s vehicle market mature.
The work by the World Bank will pay dividends economically to Brasil with the gradual implementation of LatinNCAP.
I also wonder if some affluence is taking hold in the market. As you stated the market has increased over the 2013 figures. This is apparently with better and I would assume more expensive product.
The lives saved in Brasil will save the country billions or Reals.
Brasil will sooner or later be able to produce a better export market for other UNECE players.
This is a win, win situation and I hope other nations take advantage of what Brasil has done.
Brazil is getting so good that they’ve even started laying the ground for a Chicken Tax to protect themselves
Thanks Big Al! I hope so, too. Let’s see where this leads. I think there is wind in the new Brazilian consumer phenomenon. Despite the slow down this year, this time the money has not been vaporized (yet). What happens is that here, elections have an inordinate importance. People still believe candidate A or B will make a difference. I think our de facto two party systems is consolidating and much like in the US, there is a slight difference in focus, but the main course is the same. People pay too much attention to details and think they’re important. I look at the big policies, quite similar. Regardless, investments will go up and the country will grow. Some see potential to annul this year’s 9% general drop in the car market and gain on that. We’ll see.
Thanks for the article Marcelo, it is interesting to see the evolution of the Brazilian auto market. The US market although different has gone through a similar phase. It is much easier for the manufacturers to include as standard equipment items that were optional and increase the price to cover the costs of the additional costs of safety and pollution equipment and push the sales of more higher trimmed models. It is not much more on the monthly payments to include more equipment.
Right, Jeff S. However, I recently leaned that Millennials outnumber Baby Boomers these days but the Millennials are deferring purchasing cars and homes until much later in their lives than the Baby Boomers ever did.
But when Millennials finally “bite the bullet” they generally go for more than they can reasonably afford, in both new cars AND homes, effectively rejecting the entry-level offerings of both.
Interesting, point, HDC.
Wouldn’t you say that a huge difference between boomers and millennials is that boomers, especially the earliest ones, still had the very real prospect of career security from whichever industry they entered, at whichever level?
With that kind of confidence, the babies, cars and homes would all be committed to much sooner than in today’s fragmented, globalized and 6-month-contract world.
petezeiss, I probably would not be the best person to ask that question because I really have only been employed once, for 20 years in the Air Force, then retired and struck out on my own scratching together money wherever I could find it.
There was never any doubt in my mind that if left to my own devices I would do better than if I were to seek a benefactor who would give me employment. And doing it my way also meant I got to keep ALL the money I made.
I never had a mortgage because I built my house in the desert from scratch on the pay-as-you-go plan. But I do enjoy a tremendous sense of accomplishment having done it my way.
” And doing it my way also meant I got to keep ALL the money I made.”
What’s your secret, how did you avoid taxes? lol
@highdesert cat–What you said about the Millenials is confirmed on HG TV. My first house didn’t have granite counter tops and high end stainless steel appliances nor did it have wall to wall wood floors. My first car was a Baroid drilling mud car that I bought for $1,400 dollars with hubcaps, no chrome except the bumpers, and no electric windows or locks. I live in a fairly new and nice neighborhood mostly those in their late 20s thru mid 40s with two fairly new nice high trimmed vehicles, nice homes, and 2 to 3 children. Most of these families have loans on their homes, vehicles, and large student loans.
Jeff S, I was surprised to learn from the Money Boards just how many old people are redirecting their personal wealth into the financially-secure future of their kids and grand kids.
This doesn’t mean that they are helicopter parents and grandparents that hover over their kids and grandkids. The kids and grandkids still have to work, accomplish things on their own and endure the hardships that come with life in the real world.
But making sure that their kids and grandkids do not start their working lives embroiled in loans, mortgage and debt is very high on their bucket lists. Mine too!
I subscribe to the philosophy MOST real estate affiliates share and that is to provide a roof over one’s head and food on the table as the highest priorities. I believe Kitty, my wife, and I have been very successful in doing that and our kids and grandkids entered the real world of the daily grind without debt and with a roof over their heads.
What is HG TV?
“What is HG TV?”
House and Garden Television
Good analysis Marcelo. I could put money in that it will continue to change… provided the commies in power don’t stuff it ala Argentina, Venezuela…
It is already looking like a downsized version of a mature market.
The corollary of your assessment is that 3rd world specials won’t be acceptable for long over there. Or they will get nice and fancy…