Brazil's auto sector will struggle to revive this year

Subject

Outlook for Brazil's auto sector.

Significance

Following a slow recovery of the Brazilian economy, the automotive sector has resumed some growth in sales. Vehicle production and sales have started to react to domestic conditions, such as lower interest rates, but they remain far from pre-crisis levels. Fleet sales have jumped sharply, boosted by purchases by car hire companies, whose vehicles are largely used by ride-hailing app drivers. Employment in the auto sector, however, continues to decline.

Impacts

• Auto exports will almost certainly fall again this year.
• Lower interest rates may boost sales but persistent high unemployment levels are likely to delay a sustained recovery.
• The sector’s current dependence on fleet vehicle sales may continue to expand.