Dispatches Do Brasil: How Volkswagen Lost the Market, Part I (1950s-1980s)
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.
Mmmbacon on Apr 26, 2015
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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