BRAZIL/SOUTH AMERICA REPORT
Recent heavy rainfall in Rio Grande do Sul has led to production disruptions in many automotive OEM operations located in the region, including GM, AGCO, Marcopolo, John Deere, Randon, and auto parts manufacturers like Fras-le. Despite this, automakers and auto parts companies are gaining control over production operations. However, logistical challenges persist, raising concerns.
Both Anfavea, representing automakers, and Sindipeças, representing the components sector, express worry about the production flow from these companies in Rio Grande do Sul, which serve domestic and international demands, presenting an unpredictable aspect currently.
The initial expectation for vehicle production was to remain steady despite the rains, as Gravataí and the Serra Gaúcha region, where most automakers operate, remain largely unaffected. However, parts production in Porto Alegre faced important disruptions due to many manufacturers being located in flood-affected areas in the region and the transportation from production areas to OEMs was severely affected. Some OEMs—such as GM, Stellantis and Volkswagen–already announced temporary plant shutdowns.
An anticipated negative impact on May’s vehicle sales is expected, particularly in Porto Alegre, which accounted for 9% of total sales over a four-month period. With dealerships affected by flooding, the commercial outlook is challenging. Automakers acknowledge the potential impact on annual sales projections due to the ongoing crisis in the region.
Source: Automotive Business Read The Article Read The Article
PSR Analysis: Not only the production in May is concerning, but the entire economic impact in Rio Grande do Sul is a big issue for Brazil and South America economy. Rio Grande do Sul is an important area for grain and other agricultural products and this tragedy will affect Agricultural GDP and the entire GDP of Brazil. It will hurt segments like Agricultural Equipment and Construction Equipment since an important portion of this equipment is used in Agricultural production. It also will affect production and sales of Medium Heavy Vehicles, the main transportation channel for Agricultural products. We keep monitoring the effects of the rain and preparing for adjusting the markets at our next update process in Q2 2024. PSR
Fabio Ferraresi is Director, Business Development South America, for Power Systems Research
