Despite sales growth, Brazilian automotive suppliers profits decline

Overall slowdown in the auto sector, depressed demand, negative sentiments and a severe liquidity crunch has had a devastating effect on auto sales. Auto sales are growing at a slow rate and this has caused severe constraints where Brazilian automotive suppliers are concerned.

BRAZILIAN_AUTOMOTIVE_SUPPLIERS

Forecasts where new vehicle sales are concerned stand at 3.6 million for the current year, while the year ahead does not hold much promise either, with only marginal industrial growth predicted for 2014. EBIT is set to reach a record low of 1-2%.

Sales performance during the first few months of 2013 saw stronger sales with production increase over 2012. However, passenger car sales are expected to stagnate with only 10% growth coming from the commercial vehicle sector. Roland Berger Strategy Consultants forecast that all these factors will have a negative impact on total performance where auto suppliers in the country are concerned. During the year 2008, EBIT margins were at 8.7% and have been steadily falling with margins in 2012 standing at 2.5%.

The consultants also stated five major factors which were causing these constrictions. These included pricing pressure, rising labor costs, increase in costs of raw material, significant fluctuations in exchange rates and higher logistic costs.