Brazilian Market Wrap-Up Preview: And the Big Losers Are ... Hard To Believe! Plus You Get Some Bold Predictions

Though the final numbers are not quite in yet, according to well-respected Brazilian car market journalist Joel Leite, writing for Brazilian car site webmotors.com.br, the big losers in 2010 are clear. I for one am quite shocked. Of all makers and importers in Brazil, only four lost share. The rest were all able to keep up with market growth and even gain share. Ready? Brazil’s losers are …

Fiat, Volkswagen, Toyota and Honda.

Fiat lost share in spite of its much ballyhooed new Uno (read here, here and here). VW saw customers deserting in spite of its much praised Gol (read here and here). Fiat may even sell a little more than in 2009, but it’s not keeping up with the market. Fiat had a 24.5 percent share in 2009. This is down this year to 22.9.

Meanwhile, VW lost more. It had 22.8 percent in 2009. This year it’s fighting hard to keep 21 percent. As the market as a whole grew 8 almost 9 percent, both firms are running hard, but staying in the same place. Both Fiat and VW will repeat their positions from 2009’s rankings though. First and second, respectively.

I talked to some of the people at Fiat. Yeah, some high honchos. Off the record. They admitted to that they’d expected some friendly-fire casualties as the result of the new Uno’s brash success. However, they didn’t expect that it would cost them that much in carcasualties. They have a backlog of 20,000 unsold puppies because they just can’t squirt enough out. They also held the line in terms of pricing pretty much. They told me the company has the healthiest margins in Brazil. Yummy for them. However, they are confident next year they’ll grow again and even gain market share. Why? New Palio and Siena (based on New Uno’s platform) are coming.

Fiat’s suits are crossing their fingers these cars will replicate the Uno’s homerun. Capacity will be a problem though. A new factory is coming, but it can’t start producing soon enough. Fiat’s plans are mighty and, according to equally well-known Brazilian journo Roberto Nasser (if you can read Portuguese go here), they plan to increase capacity in their original Betim, Minas Gerais State plant to 950 thousand cars a year (from 800K) and to reach production of 200,000 cars in both the old re-activated factory in Córdoba, Argentina and the new one in Jaboatão dos Guararapes in Pernambuco state.

That makes for a grand total capacity of 1 million 350 thousand cars a year (take that competition!) in their three complexes in the Mercosur area. If they don’t do that, Fiat runs the risk of losing the momentum, which would be very dangerous at this junction. Why? (Oriental drums beating in the background). Keep on reading.

VW has a different problem. It doesn’t have much in terms of new product next year. Well, except for the Jetta, but that car isn’t a volume seller in Brazil. VW’s people must be sweating it. To keep their second place, they are making mega/super/hyper promotions all the time. This of course hurts the bottom line. And this is the crux of VW’s problem in Brazil. They insist they are a premium brand. Brazilians don’t believe it. VW offers very decontended cars at prices competitors only dream of commanding. Result: Mass defections of previously satisfied customers. Also, there’s no step up in the VW line. You step up from Gol and Fox and land in a fourth generation Golf. Where’s the pleasure in that?

Fiat at least has this better sorted out, as people stepping up from Uno, Palio or Siena, fall into Idea, Punto, Bravo or Linea. Definitely they feel like they’re getting ahead.

Both of these companies are not yet, but soon will be, suffering the onslaught of popular products (read small, subcompact even) from Toyota (read here and Bertel’s most excellent, on record, piece here) and Hyundai. Not to mention Chery. They’ll start producing locally in 2013 at the latest, and in 2011, they will launch the QQ. This will be the cheapest car in Brazil. It’ll also come with content unheard of in this country at such small prices. Rumor has it selling at around 22,000 Brazilian reais ($13,000 – a bargain in Brazil?. Fiat or VW offerings in this market, with the same level of content (not only A/C and power windows and locks, but air bags and ABS, too) sell for around 33,000 reais ($20,000). 11,000 reais is a whopper of a difference in this country. Chinese cars are so far an unknown factor in Brazil. But they will be a factor. Count on it.

Toyota and Honda suffered from old lines, too (not to mention Hyundai-Kia, wow see their numbers in a future post). The Honda Civic commanded waiting lists for almost two years after launch. Now it suffers cannibalization from the smaller (but more family friendly because of trunk, trunk, very important in Brazil for some reason and not the one you’re thinking!) Honda City.

The City launched this year and already is the leader in the subcompact premium sedan market (cough!), but stole sales from big brother Civic, more than from anybody else. Civics now offer discounts and Honda dealers holler and scream their big offers like everybody else. A far cry from a year ago.

Similar situation at Toyota. They basically offer the Corolla. Next year though could be different for them. A word to the wise at Toyota, hold the pricing. Don’t believe in your own hubris. Small car buyers in Brazil are sensitive to price above all else (and are rather brand loyal, to Fiat, to VW.)

You, Toyota, you have cachet, but do you have that amount of cachet with this crowd? Take a page from Renault that lowered prices on Sandero and Logan (while offering more content) and grew. If you offer bare minimum for highest price in segment, the same fate as VW’s will befall you. Unless you’re going to launch the Etios as a premium subcompact sedan (cough!). If you do that though, you won’t get any closer to your stated goal of having 10 percent of the market by 2015 (a number that always seems to get pushed back by the Toyota brass in Brazil).

Anyway, the Japanese numbers are Toyota down from 3.1 percent to 3. Honda is a little bigger in Brazil than Toyota. However, they also fell. From 4.2 percent to 3.7.

So if these are the losers, who’s getting the Brazilian booty? Full wrap up coming soon.