China Seeks Further Inroads Into Brazil’s Auto Industry

SAO PAULO – Brazil and China sign a 10-year agreement to increase investment and trade, with the automotive sector a potential sticking point.

“We want to expand in reciprocal investments. Among the agreements are associations in the automotive, oil and gas sectors,” Brazil’s Finance Minister Gudo Mantega says during the Rio+20 environmental conference HERE sponsored by the United Nations.

China accounts for 17% of Brazil’s international trade ($77 billion) and is its main trading partner.

However, analysts note Chinese auto makers have not made significant inroads, despite spending heavily on renting showrooms and advertising their vehicles in the Brazilian market. Questions about the quality of Chinese vehicles remain strong in the minds of many Brazilian consumers.

In contrast, Korean vehicle sales have soared in Brazil now that Hyundai is building a major factory in Piracicaba in São Paulo state.

The Koreans, like the Chinese, have kept their domestic currency almost on par with the U.S. dollar, flooding Brazil with models that have more technological innovations than Brazilian-made vehicles for the same price.

The Koreans have exported products that have attracted Brazilian buyers over the past 15 years. Much of their market-share growth has come at the expense of Russian auto maker Lada, which held a big share in the 1990s only to fall by the wayside a few years later.

Cledorvino Belini, head of Anfavea, the auto makers’ association, expressed concerns in April that the two Asian countries were chipping away at the Brazilian auto makers’ market share.

But Brazil will continue nurturing its home market. Mantega described for Rio+20 attendees the country’s strategy to implement sustainable development through, among other things, promotion of flex-fuel cars and large-scale gasoline/ethanol production and distribution for the automotive industry.