The automotive industry in MERCOSUR countries is growing rapidly and presents significant investment, export, and import opportunities. In particular, Brazil, Argentina, and Uruguay are key markets for automotive parts and vehicles.
Investment in the automotive industry is expected to grow as countries in the region continue to develop their infrastructure and promote trade agreements. The region’s automotive manufacturers keep investing heavily in research and development, with the goal of becoming leaders in cutting-edge technologies such as electric vehicles and autonomous driving.
Exports of automotive parts and vehicles from MERCOSUR countries are growing rapidly. Brazil is a leading exporter of vehicles to the world, and Argentina is a leading exporter of automotive parts. The main markets for MERCOSUR automotive exports are the United States, Europe, and China.
The main imports into MERCOSUR countries from the automotive industry are vehicles and automotive parts. The United States is the main source of imported vehicles, while China is the main source of imported automotive parts.
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Brazil
The Brazilian automotive industry is the largest in South America and the seventh-largest in the world with an annual production of over 3 million vehicles and with market size of $121.5 billion in 2021. The market is expected to grow at a CAGR of 4.1% from 2021 to 2026.
Despite the current recession, the Brazilian automotive industry is still a major player in the global market. The country has a long tradition of manufacturing cars, and local automotive manufacturers continue to be major contributors to Brazil’s economy. In recent years, however, there has been a shift toward electric vehicles, and the industry is now focusing on developing new technologies to stay competitive.
National automotive producers have a long and successful history in the industry. Troller, Marcopolo SA, Agrale, Randon SA, Excalibur, and others are all leaders in their respective segments. Each producer has its own specialty. Troller is known for its off-road vehicles, Marcopolo for its bus manufacturing, Agrale for its agricultural vehicles, Randon for its truck bodies, and Excalibur for its luxury cars. The producers also have partnerships with some of the world’s leading companies. Marcopolo has a partnership with Volvo Bus Corporation, while Troller has a partnership with Ford Motor Company. Agrale has a partnership with Massey Ferguson and John Deere, while Randon has partnerships with Isuzu and Volkswagen.
Foreign local manufacturers account for the majority of the market share in Brazil, with only a few foreign brands having a presence in the country. However, the market is growing rapidly, and foreign brands are increasing their market share. The largest foreign local manufacturer is Fiat Chrysler Automobiles Brasil, which accounted for a 27% market share in 2016. Other major foreign local players include Volkswagen Group Brasil (21%), Renault do Brasil (13%), Ford Motor Company do Brasil (10%), General Motors do Brasil (9%), and Hyundai Motor Company do Brasil (4%).
Foreign brands are increasing their market share but still account for only a small fraction of the total market. The largest foreign player is BMW Group Brasil, which accounted for a 5% market share in 2016. Other major foreign players include Mercedes-Benz do Brasil (4%) and Toyota do Brasil (3%).
Export and import regulations are fairly complex in Brazil, and it can be difficult to navigate the bureaucracy involved in exporting or importing vehicles or automotive parts and components into or out of the country. One of the main barriers to success in the Brazilian automotive market is the high import tariffs on vehicles. The tariffs range from 20% to 55%, which makes it difficult for foreign manufacturers to compete against local manufacturers. In addition, there are a number of regulations that must be followed in order to export or import vehicles into Brazil. For example, all vehicles must meet Brazilian safety and emissions standards before they can be registered for use in the country.
The automotive industry in Brazil is regulated by a number of governing bodies and regulating agencies. The National Council for Motor Vehicles (CONAMA), for example, is responsible for developing policies and regulations related to the automotive sector. The National Agency of Petroleum, Natural Gas and Biofuels (ANP) is also involved in the regulation of the automotive industry, as it sets fuel prices and standards. The Brazilian Association of Automotive Manufacturers (Abracar) is the main trade association, representing the interests of automotive manufacturers in Brazil. The National Agency of Traffic (ANTT) coordinates traffic regulations. The Brazilian Institute of Environment and Renewable Natural Resources (IBAMA) is responsible for environmental protection and sustainability. The automotive industry in Brazil is regulated by the National Agency of Petroleum, Gas and Biofuels (ANP), which sets safety and emissions standards for automobiles. The import and export of automobiles is regulated by the Brazilian Ministry of Economy. It is therefore important to consult with an export/import specialist before undertaking any such transactions.
The Brazilian automotive industry faces several challenges, including high import tariffs, a lack of infrastructure, and a lack of a qualified labor force. However, these challenges are gradually being overcome, and the industry is growing rapidly.
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Argentina
The market size of the automotive industry in Argentina in 2021 reached $24.5 billion. The industry is forecast to grow at a compound annual growth rate (CAGR) of 4.5% over the next five years. This growth is being driven by an increase in disposable income, a growing middle class, and rising levels of motorization.
The national and foreign automotive manufacturers in Argentina have been hard at work in recent years to increase their production output. The country has seen a surge in the number of vehicles being built, as well as the number of jobs being created within the industry. This is due, in part, to the government’s efforts to make the automotive industry more competitive and attractive to investors. The main players in the automotive industry in Argentina are Volkswagen, Ford, Renault, Fiat, and PSA. All of these companies have production plants in the country.
Some of the most important national automotive producers in Argentina are Gestamp and Metalmecánica. Gestamp is a producer of metal parts and assemblies for the automotive industry, with a particular focus on safety-critical components. Metalmecánica is a producer of metal stampings, welded assemblies, and machined parts for the automotive industry.
In recent years, there has been a lot of investment in the sector, as companies seek to take advantage of the growing market in Argentina.
There are several market barriers that inhibit the growth of the automotive industry in the country. These include high import tariffs, restrictive export regulations, and inadequate infrastructure. In order to export or import vehicles into the country, companies must obtain a license from the National Institute of Foreign Trade (INCOMEX). The safety and emissions standards for the automotive industry in Argentina are among the most stringent in Latin America. Vehicle manufacturers must meet rigorous safety and emissions requirements in order to sell their products in the country.
The automotive industry in Argentina is regulated by the National Institute of Industrial Technology (INTA) and the National Agency of Automotive Quality (ANAQ). INTA sets safety and emissions standards for vehicles, as well as inspects vehicles and parts manufacturers to ensure compliance with these standards. INTA also provides technical assistance to automakers and parts suppliers and promotes the development of the automotive industry in Argentina.
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Uruguay
The Uruguayan automotive market is expected to grow at a compound annual growth rate of 5.4% from 2021 to reach a market size of US$1.2 billion. This growth will be largely propelled by the increasing demand for passenger cars, which is forecast to grow at a CAGR of 6.3% from 2021 to reach a market size of US$1.0 billion.
The Uruguayan automotive market is currently dominated by local manufacturers, who account for more than 60% of the market share. However, foreign manufacturers are increasingly gaining ground in the market, with their market share expected to grow from 17% in 2021 to 23% by 2025. This growth can be attributed to the launch of new models and rising consumer demand for premium vehicles.
The largest and most important Uruguayan automotive manufacturer is ANFACO, which produces buses, trucks, and other commercial vehicles. Other Uruguayan automotive manufacturers include API, ARA, and COVI. Foreign automotive manufacturers in Uruguay include Volkswagen Group, Fiat Chrysler Automobiles, PSA Group, Renault Group, and Ford Motor Company. These companies have production plants in Uruguay that produce cars, light trucks, and commercial vehicles for the local market and for export.
The Uruguayan government has a few governing bodies and regulating agencies that oversee the automotive industry. The National Institute of Standards (INN) sets the standards for vehicles, parts, and equipment. The National Traffic Office (ONATRA) is responsible for traffic laws and regulations, as well as issuing driver’s licenses. The National Direction of Road Safety (DINASTI), a subdivision of the Ministry of Infrastructure and Public Works, coordinates all road safety initiatives and promotes safe driving habits.
The Uruguayan automotive market is subject to a number of import and export regulations. In order to export vehicles from Uruguay, exporters must obtain an export license from the Ministry of Industry, Energy and Mines (MIEM). The importation of used vehicles into Uruguay is also subject to certain restrictions, with only used vehicles that meet certain safety and emissions standards being allowed into the country.
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Paraguay
The automotive industry in Paraguay is a relatively new sector, with the first car factory opening in 2006. However, the sector has grown rapidly in recent years, and the market size was worth $2.2 billion in 2021.
The main drivers of this growth have been the rise in disposable income levels, as well as the introduction of new technologies such as electric and hybrid vehicles. In terms of local automotive manufacturers, there are several national automotive manufacturers in Paraguay, including Caetano Bus, Urbus, and Caarapo. These companies produce a variety of vehicles, including buses, trucks, and cars. Although the majority of vehicles are imported from foreign countries such as Brazil and Argentina.
The automotive industry in Paraguay is regulated by the National Directorate of Vehicles (Dirección Nacional de Vehículos, DNV) and the Ministry of Industry and Commerce (Ministerio de Industria y Comercio, MIC). The DNV is responsible for issuing vehicle registrations and licenses, while the MIC is responsible for setting and enforcing industrial standards. The National Secretariat of Industry and Commerce (SECOIN) is responsible for promoting and developing industry in Paraguay. SECOIN has several departments, including the Department of Automotive Industry Promotion. This department is responsible for developing the automotive industry in Paraguay, and provides support to local automakers and suppliers.
The National Institute of Technology and Standardization (INTN) is the primary regulating agency for the automotive industry. INTN is responsible for setting and enforcing standards for automotive equipment and parts. They also work with other agencies, such as SECOIN, to develop policies and regulations that support the automotive industry.
The main barriers to the growth of the automotive industry in Paraguay are the country’s export and import regulations, which can be complex and bureaucratic. Additionally, safety and emissions standards have not yet been fully harmonized with those of other countries in the region. The lack of a robust transport infrastructure hampers the distribution of cars within the country.
Nevertheless, the automotive industry in Paraguay is growing rapidly and offers good opportunities for investors. Regulations on exports and imports are relatively straightforward, and safety and emissions standards are broadly in line with international norms.
Perspectives for collaboration with Canada
The automotive industry in MERCOSUR countries and Canada is highly integrated, with production sharing and parts trade between the two regions. There are many opportunities for collaboration between Canadian and MERCOSUR companies, including joint ventures, technology transfer, and supply chain links.
The three main Canadian investors in the MERCOSUR automotive sector are Magna, Linamar, and Martinrea. Brazilian companies, in particular, are interested in investing in Canada’s automotive industry. This would create opportunities for Canadian companies to expand into new markets and would help to strengthen ties between the two regions.
Below listed some areas for potential collaboration between Canadian and MERCOSUR companies in the automotive sector:
- Vehicle manufacturing
- Parts and components manufacturing
- Automotive engineering and design
- Automotive research and development
- Development of new automotive technologies
- Expanding trade in vehicles, auto parts, and related services