How is the automotive market/industry in Brazil now?
First, it is important to understand the impact of the last two years over the national automotive industry. Although the industry experienced an idle capacity of nearly 30% before 2007, growth rates of more than 22% for two consecutive years, have certainly exposed the industry to some systemic risks. The first impact was related to sourcing strategies. Aggressive investment plans from vehicle manufacturers (US$ 5 billion only in 2008) led to a critical rise in auto parts import levels and 1st tier suppliers currently source an average of 20- 30% of all their parts from lower cost countries. As a result, the Brazilian auto suppliers deficit over the first 10 months of 2008 was approximately US$ 1,5 billion, with total imports rising 43% in comparison to 2007. The strategy however may now back fire considering the recent local exchange rate overshooting, from R$ 1,6 = US$ 1 to R$ 2,5 = US$ 1. The demand shock hit other parts of the value chain as well. From the stand point of the deale
