Domestic market will drive Brazil automotive hopes

Subject

Outlook for the automotive sector.

Significance

Automotive production and sales experienced only slow recovery in the last two years, with exports hit by the crisis in Argentina, Brazil’s main automotive partner. Capacity utilisation is still below 2018 peaks. Consequently, Brazil’s domestic market is key to restoring sector activity, but demand prospects for this year remain sluggish.

Impacts

• The Argentine recession will be a drag on Brazilian auto exports.
• Declining expectations for Brazil’s own growth will affect the sector.
• The sector’s competitiveness depends on a new wave of investments that is unlikely to come soon.