Brazil Investigating High Car Prices

Edward Niedermeyer
by Edward Niedermeyer

Whenever our man in Brazil, Marcello DeVasconcellos reports on new model introductions in his home country, TTAC’s American audience is consistently blown away by the prices commanded by new cars there. Once, when asked why a new VW Amarok costs the equivalent of about $66,000 US dollars in Brazil, Marcello replied

Besides the very high taxes, there are the very, very healthy margins car makers practice down here.

Perhaps too healthy.

Dow Jones [via Fox Business] reports

Brazilian federal prosecutors said Tuesday they will ask the Finance Ministry to examine whether car makers in the country have been charging exorbitant prices.

There have been claims that high prices in Brazil are the result of “abusive profit” by automakers installed in the country, the federal prosecutor’s office said on its website. The prosecutors will also examine whether legislation such as the so-called Ferrari law–enacted in 1979 and named after auto dealer association president Renato Ferrari–which restricts competition among car dealerships, may also contribute to the high prices.

In retrospect, it’s almost amazing that it took this long for Brazil to look into this issue. After all, a MERCOSUR-built Amarok cost around $66,000 in Brazil, but only about $34,000 in nearby Chile (and many more examples exist). Clearly something fishy has been afoot, and needless to say, we’ll be asking Marcello to follow this investigation and report back on the results.

Edward Niedermeyer
Edward Niedermeyer

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  • Enrico.Penchiari Enrico.Penchiari on Oct 05, 2011

    The point is.. The high taxes to produce aren't the only guilt, here the automakers make money like no other place in the world! But why? For a long time had only 4 automakers in Brazil we call they "the biggest four" GM,Ford,Volks and FIAT. Now imagine only 4 automakers in a country very big with a great future potential. There was no competition, there was was a gentleman's agreement!! So for a long time they put the price they want for any crap!! Only in the 90' Honda, Toyota and others came offering modern cars but costing a lot too! Because it was a new thing that we Brazilians were not used to drive. I'm finishing I swear... Now, nowadays what's happening is.. The imported Hyundai, Kia and the Chinese came with very low prices!! These two Coreans now are consolidated on our market so they started to sell for high prices to (are you understanding how things work here now?)But the imported chinese cars are the bigger problem for "The biggest 4" because the cars still chep and selling a lot!

    • LeoAndrade LeoAndrade on Oct 06, 2011

      They only make money because brazilian buyers are stupid. They think a car lasts only 80.000 km. They want the "NEW" so badly and accept paying more for less. I own a second-hand Mercedes A Class, a car wich costs about 12k and is way much better, technologically advanced and safer than that stupid Honda Jazz/Fit wich costs 30k! Why people accept to pay 30k in a car without ABS? Without ESP? Because they are concerned in showing off. In telling everybody that their car is brand new, and show off their status quo. It's ridiculous. We spend more in cars than spend in study. In research and development. In culture. That is why cars are so expensive. Government must spend less and spend better. That 37 ministries are a huge bullshit. Not even the president knows all the 37 ministries. Is that really necessary? 37 ministries and all these strikes? All this corruption? Public health is broken, public schools are broken. Brazil have 17.000 public schools without BATHROOMS! Why we have to have 37 ministries? Entryism! What brazilian govt does is entryism. Since Getulio Vargas, Juscelino, Sarney, Collor, FHC, Lula and Dilma. All of them.

  • Magnusmaster Magnusmaster on Oct 05, 2011

    Nice to see Brazil is finally investigating high car prices. I wish this would happen in Argentina. Although we have lower prices than Brazil, considering the low quality of cars and the lack of most safety features, prices should be much lower here as well. Nevertheless, I think the priority should be forcing car manufacturers to make safer cars. The existing regulations, which will be effective on January 1st, 2014, do not take into account how well the car's structure performs during a crash. You can't make a Kombi safer by just tacking on airbags to it.

  • Carbiz Carbiz on Oct 05, 2011

    Whilst stuck in Guarulhos Airport in Sao Paulo this February in a horrific rainstorm that closed the airport for 4 hours (yay), I had plenty of time to wander around. What did my bloodshot eyes see? A brand new Camaro SS. Fortunately, my other half was with me while I attempted my (awful) Portuguese to ask the long-legged lady about the vehicle. Surprisingly, she knew her stuff, but I nearly fainted when she told me the price: $R120,000. Yikes. Wow. I knew their import duties were stiff, but that was insane. That works out to be about $69,000, horrid even by Canadian standards! Still, I did see 2 of them in Camboriu a few days later. Some status symbol! I'll venture another reason prices are higher in Brazil. I stopped in at a Chevrolet dealer in SP on a trip there in 2005 and had a chat with the salesperson. He was very amiable and spoke better English than I did Portuguese. While snickering at the Chevrolet Omega (Catera here, LOL) they had in the show room, I asked him why there were no prices or stickers on the windshield. He went to a binder and started flipping through it. Holy, 1970s, I thought, what a bonanza for the sales staff! Make up prices on the fly! He tried very hard to spin it, but I laughed and told him that I was in the biz and he was preaching to the choir. Despite all that, traffic is awful everywhere, and even in the smaller cities like Jaoa Passoa, shiny new cars are everywhere. Someone is buying them!

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    • LeoAndrade LeoAndrade on Oct 06, 2011

      @Enrico.Penchiari Shame is the 35% import fee over price tag. Plus the 27% of IPI (tax over industrial product - para os americanos entenderem). Plus ICMS, plus factory profit, dealership profit and dealer profit. Then we have the IPVA, wich is an annual tax for OWN a car and it is not destinated to infrastucture maintenance. This is a shame. Why import fee? Why not spend less and reduce taxes to move economy up? Because of the entryism. The "party friends".

  • Vww12 Vww12 on Oct 06, 2011

    Brazilians in general think that their incredibly high taxes and horrible regulations guarantee "order e progresso." What these guarantee is that unemployment and poverty will be forever high, whereas politicians will forever be rich.

    • Carbiz Carbiz on Oct 06, 2011

      Really? Have you seen how big the underground economy in Brazil is? The only thing they can control is their borders. Once a product is in the country, it can disappear and they have no control over it. The markets in SP are joke. The police make token raids, but the vendors of illegal DVDs, T=shirts, whatever know when they`re coming. Brazil`s import duties have guaranteed they become a manufacturing powerhouse. SP is the Detroit of South America. Canada had to do the same thing with the AutoPact. The emerging markets have two fatal flaws: lack of respect for the rule of law and a burgeoning underground economy. It takes a lot of money to build new highways, hospitals or schools, until people begin paying their fair share, those countries will continue to be also-rans.