Brazil Imposes New Safety Standards As Consumers Fork Out More, While VW Gets A Pass

TTAC Staff
by TTAC Staff
brazil imposes new safety standards as consumers fork out more while vw gets a pass

The Brazilian auto industry has been on edge for a week and a half, as the Economic Ministry announced that the mandate for airbags and ABS on all Brazilian cars in 2014 was “under review”. Citing worries over inflation (as car prices make up an infinitesimal part of that complex calculation) and the fact that auto sales were down, the Economic Ministry said that the 2014 adoption of the aforementioned equipment might not be in Brazil’s best interest.

According to industry sources, the government expressed worries that the measure would increase vehicle prices anywhere between 1,000 and 1,500 reais per car. In turn, the OEMs put pressure on their suppliers to lower costs, so that the OEMs could maintain a healthy profit margin while keeping the price increase to around 500 reais, allowing them to adopt a posture that showed them as both safety oriented and caring about the consumer.

Although the safety mandate passed, an exemption was granted for the VW Kombi, which will remain in production.The Kombi is still made by hand in Brazil, and our sources tell us that they are among the highest paid auto workers in Brazil, and highly protected by the auto worker unions. In addition, the Komni’s precarious existence means VW is reluctant to train anyone to build the Kombi – they just keep the old timers around instead.

As late as a month ago, it appeared that the Kombi was finally set to die, and VW launched a final edition that cost 85,000 reais (roughly, $37,000), a sum VW happily pocketed. Now, with this announcement, VW can keep on making the Kombi, at estimated profit margins of around 80 percent.

The end result is more profit for the OEMs, and good PR for both the unions and the government. On the other hand, Brazilian consumers get the raw end of the deal.

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  • Synchromesh Synchromesh on Dec 19, 2013

    Is the market so awful that for $37K there is no better alternative than this relic of 50 year old technology?

    • Marcelo de Vasconcellos Marcelo de Vasconcellos on Dec 19, 2013

      There are. There's the Fiat Fiorino, a van based on the Uno, and the Doblo Cargo. The Fiorino is cheaper than the Kombi but smaller, and the Doblo is bigger and more expensive. Neither will seat more than 2, nor will they be as cheap to maintain. The Kombi can be maintained with spit and, a-hem, alternative market parts. So if you want to carry more than 2 people and cargo, Kombi it is. I believe the Fiorino outsells the Kombi, but I could be wrong. Oh, there were also some cheap Chinese vans. They started taking the market from the Fiorino and Kombi, so much so that VW started talking about the end of the Kombi. The Fiorino seemed to have held its own. But then, those Chinese vans started needing maintenance, frequently, business owners started to unload them fast. Business people gave them a chance, then killed them. Then the government raised taxes on imports rendering Chinese vans a mute point. Guess people who buy the Kombi are sort of like the people who insist on buying the Ford and GM vans in the US. No doubt they have a positive thing or two though its probably undeniable that in terms of car, the Euro vans are better. BTW, I believe the first Kombi rolled off a Brazilian assembly line in 57. So its closer to 60 yr tech now.

  • Hummer Hummer on Dec 19, 2013

    Seems pointless to push this regulation. Obviously if its still being made then people are still buying it, despite the lack of safety equipment. Obviously anyone who buys it is aware if its shortcoming, if they worried about safety then they have other choices. To demean this vehicle because of what it lacks, you may as well argue that the model T is dangerous because you can get a splinter from it.

    • See 6 previous
    • Marcelo de Vasconcellos Marcelo de Vasconcellos on Dec 19, 2013

      @Marcelo de Vasconcellos Agreed and agreed again, Hummer. The pain here is only starting. Hopefully you guys will improve faster and "carry" us along. Keeping my fingers crossed.

  • Akear The Prius outsells all GM EVs combined, which is really not saying much.
  • Akear The sad truth is the only vehicle FCA sold that broke the 200,000 sales barrier was the 200. I rented one and found it impressive. It is certainly better than the Renegade. At this point I would buy a used 200 over a Renegade. Who in their right mind would buy a Renegade?
  • Akear I just realized 80% of these EV vehicles producers are going to be liquidated within the next five years. It is not possible to survive by selling only 3000 vehicles a year. This reminds me of the bust of the late 90s and early 2000s. Those who don't learn from history repeat it.
  • 3SpeedAutomatic I drove a rental Renegade a few years back. Felt the engine (TIgerShark) was ready was ready to pop out from under the hood. Very crude!! Sole purpose was CAFE offsets. Also drove a V6 Cherokee which was very nice and currently out of production. Should be able to scoop up one at a fair deal.🚗🚗🚗