In 2022, the Brazilian car market was just over 1.9 million vehicles. This represented a 1% drop compared to the previous year, but still placed the South American country as the sixth largest in the world in car consumption, below China, the United States, India, Japan and Germany, but above the United Kingdom, France, South Korea and Canada, the top 10 on the planet. More than the excellent performance of the Brazilian market – which was already the fourth largest in the world in 2010, with 3.9 million vehicles sold in its territory – this is due to the fall of important European markets such as France and the United Kingdom, which face only the shortage of products that the whole world still suffers from, but also higher inflation than in other regions, due to the Russian invasion of Ukraine. But it is interesting to know that a good part of that market is supplied by products made in Mexico, which has found in the South American giant a good alternative to reduce the chronic dependence on what the United States buys, from which it still suffers.
Mexico is a much more competitive country than Brazil, when it comes to producing and exporting automobiles. A study carried out by the Brazilian Anfavea (National Association of Motor Vehicle Manufacturers) shows that, after taxa vehicle costs 44% more to be made in Brazil compared to one produced in Mexico. It will be necessary to take care of this calculation, since they consider the Mexican VAT, but not the ISAN. Even so, the difference is favorable to Mexico where it costs 24% less to manufacture orn vehicle, which helps to have a great advantage when we calculate the production and exports of Mexico vs. Brazil.
This less competitiveness has caused Brazil to lose production of automobiles, such as the Versa, whose new generation is only manufactured in Mexico while the old one, now called V-Drive, It is built in both countries. The Brazilians also lost markets to which to export. For example, him Virtus and the T-Crosswho previously came from that country, now come from India, because it is a better business equation for Volkswagen.
Mexico sends many cars to Brazil. The main ones, in order of quantity, are the Ram 2500, Chevrolet Equinox (still made for export), Audi Q5, Nissan Versa, Mercedes GLB, Ford Bronco Sport, Jetta, Sentra and Ram Promaster. A total of 19,020 units were sent to Brazil and in this regard, our trade balance is unfavorable, since they sent us 86,000 vehicles last year, that is, 18% of their exports had Aztec soil as their target. Argentina is its main market, with 29% of the total. It should be noted that the cars we send there are more expensive than the ones we buy. Brazil sends Fiat Mobi, Argo, Fastback, Jeep Renegade, Renault Kwid, Captur, Oroch and VW Saveiro to Mexico.
In production and exports, the Mexican position is much more favorable. In 2022, 3.3 million vehicles were produced in Mexican territory, against 2.37 million manufactured on Brazilian soil. In exports, they once again showed their lower competitiveness and could only send 450,000 vehicles, while Mexico exported about 2.7 million new units, between passenger and light commercial vehicles. Of course, the vast majority of these exports go to the United States, which still accounts for more than 75% of the vehicles made in Mexico. Yes, Don Porfirio Díaz would say that we are far from God, but in this case we must be thankful – and very much – for being so close to the United States.
There is not, as such, a war between Brazil and Mexico in the car market. What there is is a cooperation that works very well in both directions. That agreement is called ACE 55 (Economic Cooperation Agreement) and the last modification, made in 2019, completely released the quotas, allowing sales without tariffs or limits in both directions. But this was not always the case and the Brazilians have already changed the rules a few times, when they perceive that the agreement harms them. At this moment we receive many more cars from Brazil than we send and apparently they are happy with this. But the day someone there finds out that production of the Jetta is in Mexico, like the new Versa and Sentra, among others, they may decide to turn off their Mexican imports. It would not be the first time. Hopefully I’m wrong.
