By on March 19, 2015

JK Fusca

There are a couple of things that mark Brazilians of all stripes. Football (the “real” world type) is surely one. There are many others. “Feijoada” is something almost every Brazilian loves, and the “caipirinha” drink has been a constant forever. However, things change. Brazilians now drink more beer than “cachaça” that is the basis for caipirinha and the city of São Paulo boast more sushi bars than Tokyo and eats more pizza than Rome, Milan and Turin combined.

In terms of cars, things change as well. Elected in the mid 1950s, President Juscelino Kubitschek determined that Brazilians would build and buy their own cars. He did so by launching his “Plano de Metas” (Objectives Plan) in 1956 that promised to make Brazil grow 50 years in half a decade (his mandate). Actually, this was deepening of the course Brazil had been following since after the Second World War and as a reaction to a then largely agricultural based economy devastated by the effects of the New York Crash.

The plan followed the substitution of importations ideal. Brazil would not depend on others anymore. As such Petrobras was created, the steel industry (on a grand scale) was re-launched, the road network was incredibly grown, an “interiorization” of Brazil was promoted, agriculture was modernized to produce more food and open up new frontiers, locally built heavy machinery was incentivized and so on. By the time the above mentioned President was elected, several bottlenecks were identified and his plan sought to address them and deepen the process.

And by golly it worked. Sticking to motor vehicles, from 1957 to 1968 the car fleet exploded 360%, buses skyrocketed 194% and trucks boomed by 167%. In this context, and due to its success, Volkswagen become unequivocally associated in Brazil and became Brazilian. Though a late comer here (installed in 1953 while Ford and GM have been present here for more than 90 years), Volkswagen was a key player and made very good use of the Plan’s attention to motorizing Brazilians. In fact, the President attended the launch of the Fusca (Beetle) and his famous photo in the factory on-board a convertible Beetle became “the” image of the inauguration of the Brazilian car industry and many think of that as the first Brazilian car.

That picture of course hides as much as it enlightens. The Fusca was not the first Brazilian-built car and that Fusca was the only convertible one ever built in Brazil. Nonetheless, the image stuck. Also, undeniably, the Fusca was (almost) perfect for Brazilians at the time. It sold so much, that to many it is the car that put Brazilians on wheels. 53% of cars sold in Brazil in 1967 were Fuscas. In the late 60s and early 70s almost 3 in 4 cars sold in Brazil were “Volks” (as we say here). Over this time VW do Brasil would add a number of Fusca-derived cars to its stable, the Brasilia, TL, Karmann Ghia, SPI and II. On the commercial vehicle side, the Kombi (Bus) dominated and was many a working Brazilian’s car. The first non-Beetle related Brazilian VW was the 70s Passat.

The Beetle was the leader from its launch until 1980. Only the following year would it relinquish the title to the Fiat 147 that would lead until 1983. From 1984-1986, a non-small car, the Chevrolet Monza would be the leader in a historical fluke that punctuates how deep the recession was in those days (only rich people were buying cars), while a Volkswagen, the Gol, would take the top spot in 1987 and only let go of it in 2014. In 27 years, the Gol would outsell the Fusca by a very large margin and would lose the monthly crown only a few times, to rivals from Fiat (Tipo, Palio and Uno).

The ongoing success of the Gol hid a salient fact. Volkswagen was and is not the most sold car brand in Brazil anymore. Hasn’t been for more than a decade. During the last few years, it actually became closer to falling to number 3 than regaining number 1 (as it did last year when GM outsold it).

So what happened?

In the text until now, there are a couple of tips. If you read carefully you will see passing mentions of a couple of other brands. In a nutshell, Fiat happened.

In the 50s, Volkswagen had the right product at the right time. The Beetle and Kombi were cheaper than the others in their respective arenas and by force of numbers and simplicity grew a reputation for ruggedness and reliability that could not be overcome. So from the 50s to the 70s a comfortable pattern emerged, Volkswagen on top, selling cheap cars, General Motors and Ford battling it out for second place. Those three together combined to weed out the less strong, like Ford buying out Willys Overland, DKW being absorbed into VW and Chrysler resisting until the 70s when the hard knocks of the oil crisis, Brazilians’ growing preference for Euro cars and Lee Iaccoca’s retrenchment into America led to it being sold in Brazil (VW picked up the spoils). From that time, only Toyota survived as an independent maker here, but it only made in very small numbers a version of the first generation Land Cruiser, called Bandeirantes, for 40 years and refused to jump into the middle of the fray.

In 1976, Fiat came to Brazil. Making use of generous incentives from the state of Minas Gerais (which extended credit lines, donated land, etc. with the understanding that Fiat would buy back the state’s participation after a period), they built what would become the second largest factory in the world today producing almost 3,000 cars a day. The endeavor was so successful that Fiat paid off the state before the deadline.

The car Fiat launched was the 147. In a market closed off to imports, the impact of that car cannot be understated. Front wheel drive, diminutive dimensions, crumple zones. All quite shocking. Of course, the jokes came fast and thick, but the little car shook them all off. It was also the first car that spawned a family. Up till now, most cars were sedans and some offered a station wagon variant. The 147 started off as a hatch, but Fiat managed to build a sedan, station wagon, delivery van, passenger van and pick up off of the same project. It also followed in Volkswagen’s footsteps and played the regulatory game well. It was the first mass produced car to run on ethanol just as Brazil was swinging into an all out ethanol strategy. That is a crucial development and led to its leadership in the early 80s.

Of course, the car had some problems. A cranky gearbox, an aversion to water (due to a badly placed distributor that could and did get wet driving over large puddles of water, a very common thing here), a need to keep an eye on the timing belt, but soon these characteristics were absorbed and people could see the strong points, more space inside than competitors (transverse engine), a nice trunk, economy, resistance.

In 1984, the Uno was launched. It took the best of the 147 and added to it. It was bigger, with a larger boot, more comfortable, less noisy. It also gave rise to a large family, including the very successful Fiorino van and pickup variants (that slowly and surely ate away at the Kombi’s commercial vehicle dominance). Volkswagen meanwhile seemed intent on remaining “deitado em berço esplendido” (lying down on a splendid crib, as the song says and is so often repeated when referring to Brazil as a country). It kept on producing the Beetle and derivatives. The Passat died. Volkswagen was torn between following the market and keeping its until then perceived selling points (and stressed and stressed ad nauseam in their ads). Air-cooled engines, rear-mounted engines, back wheel drive.

In 1984, Volkswagen finally hit upon a solution. They launched their Gol. Aggressively-styled, it looked like VW had finally made it into the 80s. It was front-wheel drive, had decent interior dimensions, engine in front and a real trunk. However, in signs of what VW would later do by displaying an unjustifiable stubbornness, which contributed to their downfall, the engine was longitudinally-mounted (robbing internal real estate) and…air-cooled. Only the 1986 version, finally launched with a larger engine and water-cooled, would the car take off and the Gol would go on its 27 year joyride.

That would be the 80s for you. A slow, apparently grudging VW renaissance with the Gol spouting a family (very successful), GM in second holding on, while Fiat would slowly pass Ford and become in reach of the larger Volkswagen and GM while Ford would wither into a lagging fourth place. In a closed market, changes were small, but meaningful. Fiat began painting their small cars in metallic shades. Bright reds, blues, green. Even black (a color until then apparently reserved only for larger cars). They built their cars with four doors. Changed the wheel covers every year. In a stagnant market, all the moves, big and small, caught a lot of attention. But it was not only that, their small cars offered AC, power windows before anyone else. There was also some financial trickery. In a time of rampant inflation, VW would raise the prices of their cars fist. The next day so would GM and Ford. Fiat would stave off the increase for a week or two. This meant that for sometimes half a month, their cars would be significantly cheaper, sometimes by 20 or 30 percent.

There was also the issue of Autolatina. Ford was by the 80s the sick man in the Brazilian car-scape. Unable or unwilling to sell their euro Fiesta here, they had the ancient Corcel family and the Escort. None competed on price and Ford engines were weak in comparison. Ford struck a deal with Volkswagen. In return for VW engines, they would build and label some of their cars as Volkswagens. As VW was the controlling partner, they kept the best to themselves. They launched Escort-derived VW versions, while Ford got the engines and a Santana-derived luxury car. Neither fared well. The VW faithful largely reneged the Escort based Pointer and Logus. In an inexplicable decision, the hatch Pointer only came with four doors, while the sedan Logus with two. That as much as anything else explains the flop of these cars. And VW’s unwillingness or incapacity to bend to market desires.

 

 

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30 Comments on “Dispatches do Brasil: How Volkswagen Lost the Market, Part I (1950s-1980s)...”


  • avatar
    mike9o

    Interesting read. VW’s hubris must be a worldwide company value since its also apparent in the US market.

    • 0 avatar
      Lorenzo

      At this point, it seems to be part of Volkwagen’s DNA. They never had the market penetration in America that they had in Brazil, except that the Beetle was the dominant economy car by the late 1960s, when the first Corollas arrived.

      Volkswagen stuck with the Bug/Karmann Ghia when Toyota, Datsun and later Honda were ripping huge chunks of the American economy market away from them. They did the same thing with the Rabbit in America that they did in Brazil – only a 2-door hatch for several years, and the Rabbit pickup was a poor competitor to the early Toyota and Datsun pickups.

      It doesn’t seem to matter where they go, Volkswagen does it the same way everywhere, with headquarters overruling or ignoring suggestions from management of their subsidiaries. That has to be institutional.

      • 0 avatar

        Yep, it does seem to come from the top. I actually know some people who have worked at VW Brazil and they say the management is completely closed to suggestions. Very top down. By this point in time VW is the only one of the Big Brazilian 4 who have not had a Brazilian as president and very few directors. All have been German with the exception of one British gentleman that was quite a disaster and mentioned in Part 2.

    • 0 avatar
      SCE to AUX

      +1, mike9o and Lorenzo

      And now they’re talking about reviving failed ideas for the US market, such as a van and a truck, as a way to achieve their plans for world domination.

      Broad product offerings only dilute your resources if they’re the wrong product offerings.

      Marcelo – Thanks for yet another excellent and educational article!

      • 0 avatar

        Thanks SCE to AUX.

        We get the Amarok here. I prefer the Ranger frankly and the S10 (similar to the Colorado truck there)is much more of a truck. The Amarok appeals here mainly to urban cowboys. Its only engine is the 2.0 diesel and I don’t think that will appeal much in the US.

        And the van, how large would that market be?

        • 0 avatar
          Big Al from Oz

          Hey Marcelo!
          I’m with you regarding the Amarok. I prefer the Ranger. But, the Ranger’s, Mazda counterpart the BT50 I find even better than the Ranger.

          The BT50 is butt fugly on the outside, but Mazda have done a superior job of the interior, changed the steering ratio (quicker).

          That said, I still do think the Amarok is a nice pickup. What the Amarok needs is a larger diesel, with more low down torque.

          I hope VW does make the V6 diesel Amarok. Now that will be something.

          • 0 avatar

            Hey Big Al!

            We don’t get the Mazda here, so I’m not familiar with it. But I’ll take your word for it!

            The V6 diesel does sound like a good idea, in our countries. Our American friends do just fine with their gasoline engines.

  • avatar
    MPAVictoria

    Very interesting! Thank you.

  • avatar
    cpthaddock

    Thanks Marcelo, looking forward to the next part.

  • avatar
    bobman

    Hmmm, I thought both parts of your post were in the version I read. I had another look after reading your comment and noticed only part I is posted now. I guess someone must have noticed the error and posted the edited version.

    Anyway, I enjoyed the (lengthy, 2 parts) read. Good article, thank you. Perhaps they’re repeating their mistakes here in NA. Odd how a big organization like Volkswagon can misinperpit market demand as they did.

    • 0 avatar

      Hey bobman, exactly. I like long articles probably more, much more, than the next guy, but I’m one of the few. So yes, it was supposed to have been two parts and now it is. But nothing has been edited or taken out, just split.

      I also think it is very weird they can so often misread the market. I think it happens so often, it is by design. They just want to do what they want to do and the market follows. When someone comes along and plays their game better than they do, they seem to be at a loss on what to do and take a long time to respond. Like Fiat banging away at them from the late 70s on and GM doing the same later with great success. Echoes to what the Japanese did to them in the US starting from the 60s it would seem. I also think the fact that in their home country people only buy German cars insulates them from much as has their success in wider Europe and China.

  • avatar
    -Nate

    Another great article .

    I read everything you write .

    -Nate

    • 0 avatar
      heavy handle

      Same here, great job Marcelo.

    • 0 avatar

      Thanks Nate for the kind words. I always make sure to read your posts, too. Have learned quite a few things from you over the years. I’m honored to have you reading.

      • 0 avatar
        -Nate

        .
        PFFT .

        I’m just a Journeyman Mechanic ~ you know ever so much about the Brazilian Market and I have always been fascinated by it , being a long time die hard Air Cooled VW Guy .

        Plus , you write well .

        In the 1970’s I bought a ’66 Brazilian Beetle that had really been through the mill ~ it was the pizza delivery guy’s car in Highland Park , IIRC I paid him $600 for it just because…..

        It had been center punched and the pan changed , luckily the original Brazilian Market only upholstery was still 100 % intact over the poorly repaired & mangled seat frames , I was able to cobble up some old German seats and modify them to suit , pissing off my Body man greatly as did my insistence of salvaging the original fenders , doors and lids…

        He’d never welded up suck badly mangled sheet metal before =8-) .

        I was even able to remove , clean and re install the original headliner after I had the body (more or less) straightened and re sprayed .

        I also had a 1980 (?) base model Brazilian Beetle with NO HEATER so I imagine it was an 1100 model (?) .

        That was a real cluster#@!!&*K as we tried to sneak TWO of them in and Customs found them in the back of a container full of cylinder heads… long boring story no one wants to hear I’m sure .

        -Nate

        • 0 avatar

          Hey Nate. It’s not about titles or professions but your humanity. Much of what you wrote on your kids and dad are just so amazing and human.

          Plus you always tell great stories and have a lot of experience. If someone can’t learn something from what you write I feel sorry for them.

          As to the hinted story, it sounds amazing. No need to tell if it’ll raise trouble though,;).

  • avatar
    FormerFF

    Ever since I’ve been reading Marcelo’s articles, I’ve been wondering what the VW Gol was. Now I realize it’s the same car that was briefly sold in the U. S. as the Fox.

    • 0 avatar

      Smiles. Yes, I think that was the one. If not mistaken you got the Voyage though, which was the sedan, and the Parati, which was a station wagon. The Gol is a hatch and I think you didn’t get that one. And to get more confusing in the next part there is another VW Fox, no relation to the US Fox.

      • 0 avatar
        FormerFF

        Yes, we got the sedan and wagon, but no hatch. I think that the wagon may have been the last 3 door wagon sold in the US market.

        I see now VW uses the Fox name for a city car. I’m thinking we won’t be getting it here.

  • avatar
    jim brewer

    Marcelo, by “New York Crash” you mean the great depression? 1930s?

  • avatar
    Roberto Esponja

    Enjoyed your article very much, Marcello, thank you. Just one comment about this:

    “and Chrysler resisting until the 70s when the hard knocks of the oil crisis, Brazilians’ growing preference for Euro cars and Lee Iaccoca’s retrenchment into America led to it being sold in Brazil (VW picked up the spoils).”

    The sale of Chrysler’s international operations did not have anything to do with Iacocca, but was one the requirements set forth by the US government as a condition for its loan to Chrysler. It was an unfortunate requirement, as Chrysler lost the international presence it had worked so hard to gain, and hasn’t recouped it (Fiat aside) to this day.

    • 0 avatar

      Yeah, I know it was a US government requirement, but he accepted. In the case of Brazil some suggest however it was welcome as Chrysler was hurting from a lack of a small car. Their first try the 1800 didn’t go anywhere and the second, the Polara, was maybe too tainted.

      Anyway thanks for pointing it out, I should really have phrased it better.

  • avatar
    Autobraz

    Great article. I’m about to read part 2. Your Autolatina comment reminded me of another great car in my family’s car history: the Ford Versailles, the Ford version of the Santana Station Wagon. It was a great, comfortable car for the family.

  • avatar
    mmmbacon

    Marcello, this is an interesting article, good job!

    The reason why VW Pointer was a 5 door hatchback and VW Logus a 2 door sedan was because Autolatina was trying to avoid competing models. For 1993, the Ford Orion/Verona became a 4 door sedan, meaning the VW Logus had to be the 2 door equivalent.

    This made a lot of sense especially in Argentina where VW and Ford had merged their sales operations.

    Autolatina was extremely profitable for both companies and many of their cars sold well, but by 1994 both companies were importing vehicles from Europe and decided to focus on their global models.

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