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The Brazilian automotive industry: its history and evolution

by | Mar 29, 2023

The Brazilian auto industry has a long history in the country. The first automakers arrived in the country in the 20th century. Before that, the first motorized vehicle arrived in Brazil in 1891 in the port of Santos (SP). The Peugeot Type 3 model was the first car to move on the roads of Brazil. It was imported by the Brazilian inventor of the airplane, Santos Dumont. Later, another model arrived in São Paulo brought by the family of the founder of the São Paulo Military Police, Tobias de Aguiar. However, the first car was licensed in the country in 1903. Plate number 1 belonged to Count Francisco Matarazzo.

The history of the Brazilian automotive industry reveals a lot about the country’s technological, economic, and social evolution.

First cars in Brazil

In the first decades of the 20th century, São Paulo received the factories of Ford and General Motors, both based in the capital of São Paulo. The first to arrive was Ford. It established itself in the country in 1919, when it began assembling its Model T. In 1925, General Motors made its entrance into the Brazilian automotive industry. During this decade, the first paved highway was constructed between Rio de Janeiro and Petrópolis. Between 1920 and 1939, the number of cars increased from 5,000 to 43,000 in São Paulo.

The Automotive Revolution of the 1950s

At the end of the 1940s, Brazil maintained an aging fleet of American and European cars and trucks from the 1930s. However, from 1941 until the end of World War II in 1945, the number of auto parts factories increased in the country, reaching 50. This scenario gave origin to a series of suppliers that would later come to supply the local manufacture of automobiles in the growing Brazilian automotive industry.

However, until the middle of the 20th century, it had only one automotive assembly plant. As a result, there was no total local production of vehicles. This began to change under President Getúlio Vargas. Two crucial initiatives were the opening of  The Brazilian national steel company, Companhia Siderúrgica Nacional (CSN), and its national motors factory, Fábrica Nacional de Motores (FNM). Both of these entities were located in the state of Rio de Janeiro.

From 1947 to 1952, the Brazilian government took action intending to restrict imports of motor vehicles and auto parts. As a result, it invested more in the Brazilian automotive industry than importing oil or wheat. Even so, given the exchange rate favorable, the Europeans occupied a significant share of the market in Brazil. If previously the streets were filled with American cars, in the 1950s, British automobiles were commonly seen on Brazilian roads.

In the government of Juscelino Kubitschek, in 1956, the Executive Group of the Brazilian Automotive industry was created (GEIA) by decree nº 39.412. The organization was put under the command of Admiral Lúcio Meira to make national car production initiatives a reality. At the time, the Brazilian fleet had 800,000 vehicles, and cars and trucks had a huge demand. As a result, Brazil established ambitious nationalization goals for the industry.

Manufacturing was one of the policy pillars of the Kubitschek government. The promise of 50 years of progress in five had industry and transport as two support pillars. The focus was to leverage domestic industry, creating an industrial park of factories, a network of auto parts suppliers, and peripheral infrastructure services.

Thus, the first 100% Brazilian-made national car appeared in 1956. It was made by a company called Romi, which manufactured lathes and agricultural equipment. The Romi Isetta had an engine that was similar to that of a motorcycle, small wheels, and two doors. The National Motor Factory and Vemag launched nationally produced cars the same year. However, these were licensed copies of European and North American models.

With the 1953 ban on importing fully manufactured autos, Volkswagen, Mercedes-Benz, and Willys-Overland established factories in Brazil. In addition, the GEIA showed that, by 1960, 90% of the trucks and utility vehicles sold in Brazil should have domestic components. These goals have been met and exceeded, thus strengthening the Brazilian automotive industry.

Eventually, the dominant manufacturers began to produce modern vehicles that were more compatible with the demands of the Brazilian driver. As a result, the industry started to coalesce in São Bernardo do Campo, São Caetano, and Santo Andre ́, also known as the ABC region of São Paulo. In the 1970s, new assemblers emerged in the Brazilian automotive industry, establishing themselves in other areas of the country, emphasizing Fiat Automóveis SA in Minas Gerais, Agrale in Rio Grande do Sul and Volvo in Parana ́.

The Brazilian automotive industry today

In the 1990s, vehicle imports rose again when the Brazilian automotive market opened. Currently, Brazil has 20 companies that compete domestically. The Brazilian automotive industry comprises 65 factories in 11 states, with an installed capacity of 4.5 million vehicles annually. In addition, the country currently has approximately 5,500 dealerships. Brazil exports about 22% of its automobile production, and the industry employs approximately 126 thousand workers.

After a period of recession, the recovery of the Brazilian economy should signal the automotive sector’s return to a path of growth. The industry closed 2018 with a growth rate of 16%, and in 2019 the industry’s expansion exceeded 12%.

Overcoming a recession is not easy for any sector of an economy, including the automotive industry. However, some experts believe that the Brazilian automotive industry has a promising future even though they may think that the government must improve incentives to the sector. One of these initiatives is “Rota 2030,” a government program defining vehicle production rules in Brazil for the next 15 years.

Divided into three periods of five years each, the program predicts how much manufacturers will need to invest in research and development in Brazil. The goal is that, by 2022-23, companies will use 1.22% of their invoicing for R&D activities. In return, they can deduct from 10.2% to 12% of the amount invested in income tax.

Rota 2030 will also require greater energy efficiency, and vehicle safety, in addition to stimulating the creation of future solutions for mobility, autonomous vehicles, and professional training.

The Brazilian automotive industry will remain very important to the nation’s economy. It is one of the country’s largest manufacturing sectors and is crucial in generating employment and promoting technological development. Today, Brazil is also one of the world’s largest producers of automobiles, and many of the major global automakers have production facilities in the country. Among the vehicle models manufactured in Brazil today are the Fiat Pulse, Jeep Compass, Peugeot 2008, Volkswagen Gol, Honda HR-V, Chevrolet Tracker, Land Rover Discovery, Mitsubishi Outlander, Hyundai HB20, and others.

 

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