In Brazil, Volkswagen Is Victorious And Gaining On Fiat
06 April 2009 - 10:54PM
Dow Jones News
Rua Consolacao in downtown Sao Paulo has its share of new car
lots, but the one with the big VW hanging over the door is seeing
the most action.
"They are coming in for the Novo Gol and the Fox, and we want
them to keep coming in," said Oscar Ferreira, sales manager of a
Volkswagen dealership on Rua Consolacao.
The subsidiary of German auto maker Volkswagen AG (VOW.XE)
couldn't be happier with sales in Brazil. While car lots sit packed
with unsold vehicles in Europe and the U.S. owing to ailing
economies, Volkswagen in Brazil sold 38.6% more cars in March than
it did in February.
Last month, it sold 12% more than its rivals, while the general
market sold just 1% more and major auto makers like Ford (F) and
General Motors (GM) saw sales decline.
Volkswagen owes its success to the successful June 2008 launch
of its four-door hatchback, the Novo Gol and its upgraded Gol, a
two- or four-door hatchback. Both vehicles have sent Volkswagen
ahead of 2007 and 2008 market leader, Fiat when it comes to car
sales.
"We'll admit it, these Gol sales are surprising even our best
projections," said Gustavo Luis Schmidt, sales director of
Volkswagen in Sao Paulo. Novo Gol car sales are 20% to 25% above
expectations, according to Schmidt.
In a recent poll by Brazilian auto magazine Quatro Rodas, three
of the top 10 cars readers were inquiring about most were
Volkswagens. There wasn't a single Fiat on the list. Toyota Corolla
was No. 1, but is an expensive import by comparison to the roughly
27,500 Brazilian reals ($12,387) Gol models.
Brazilian car sales have been breaking records over the last
several years. Brazil has become a growth story for international
auto makers. But when the financial crisis hit Brazil in October,
the story changed and car sales plummeted. Risk-averse banks raised
rates and shortened payment terms. Mostly all of them increased
down payment requirements. Sales dropped immediately, until the
government gave auto makers a temporary tax break on a federal
industrial production tax. Lighter weight cars like the Gol saw
sticker price reductions of 7.7%.
Nationally, car sales have been picking up since December and
rose on the month by 36.2% in March to 271,442 units, according to
the National Motor Vehicle Manufacturers Association, or Anfavea.
Volkswagen sold 58,929 cars to Fiat's 54,109 units. Fiat figures
are higher when pickups and sport utility vehicles are thrown in.
Fiat sold 64,469 cars and trucks to Volkswagen's 64,298. Since
January, Volkswagen has sold 152,172 cars and trucks while Fiat has
sold 152,761 units.
"Fiat is certainly not out of the running," said Andre Beer, a
former executive at General Motors now running an automotive
industry consultancy in Rio de Janeiro.
"Car sales are rising so much in Brazil not only because of the
tax break, but because there is a stupendous amount of demand
here," Beer said.
In Brazil, there are 7.2 habitants per vehicle compared with
around 1.5 habitants per vehicle in mature car markets like the
U.S, he said.
Meanwhile, back in the Volkswagen-Fiat auto race, Volkswagen
sold around 28,000 Gols in March. The Voyage, a Gol inspired sedan
and the company's latest addition, sold 7,402. Fiat's brand new
Linea sedan, on the other hand, sold under a thousand units,
according to the National Automotive Dealership Association, or
Fenabrave.
"Volkswagen has the only new low-cost product on the market
right now," Beer said, adding that credit is loosening up and that
has provided an extra relief.
-By Kenneth Rapoza, Dow Jones Newswires; 5511-2847-4541;
kenneth.rapoza@dowjones.com