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By Marcelo Rochabrun
SAO PAULO (Reuters) – Brazil’s largest truckmakers are expressing optimism again about the growth prospects for Latin America’s largest economy, even as the country continues to struggle to rebound from a deep recession that began in 2015.
“We are breathing optimism,” said Martin Lundstedt, Volvo Group’s President and CEO (ST:), who traveled to Sao Paulo to take part in the biennial Fenatran expo, the largest truck and machinery trade show in the country.
“Latin America … is coming back. We are having a very strong year.”
Economic growth, however, has been sluggish in Brazil, with economists now expecting less than 1% growth in 2019, a forecast that has undergone several downward revisions since the year began. Still, for all their rhetoric, Brazil’s top four truck makers did not announce new investments in the country.
Truck sales and production have defied the broader economic trends, and industry trade group Anfavea this month revised its growth forecasts upward. It now expects domestic Brazil truck sales to rise 35% while production will grow a healthy 8%, weighed down by a crisis in Argentina, the second-largest consumer of Brazilian trucks.
“What happens is that the truck market is always ahead of the curve, ahead of economic growth,” said Wilson Lirman, who leads Volvo in Latin America.
That economic growth “starts around now,” Lirman added, pointing to sweeping financial reforms that Brazil’s right-wing government has proposed, which have cleared several congressional hurdles but not yet received final approval.
Brazil has South America’s largest auto industry and is a particularly important base for truckmakers, where it is Volvo’s second-largest market globally. The country was Mercedes Benz’s largest market in the world before its economy crashed in 2015. It remains the largest market for Swedish maker Scania [SCVSA.UL], a subsidiary of Volkswagen AG (DE:).
Brazil’s truck sales reached 137,000 in 2014 and essentially fell by half the next year, according to industry figures. They have grown significantly since then and will push 100,000 for the first time since the crash this year, but have yet to recover to their pre-recession levels. The recession is Brazil’s deepest on record.
“Many of you will remember when we said, ‘Remember the Brazilian market because we will be ready for when it comes back,'” said Stefan Buchner, head of Mercedes Benz Trucks, who also traveled to Sao Paulo for the Fenatran trade show. “Now, here we are. The Brazilian market is growing.”
Mercedes Benz, the market leader in Brazil with about 30% market share, expects 2020 to be an even better year for its truck business.
“Why is that? We have significantly reducing interest rates,” said Philipp Schiemer, who leads Mercedes Benz in Latin America. “We had very bad years in the construction business … but it’s regaining some strength, and the retail business is also picking up.”
Not everyone has believed in the truck business potential.
Ford Motor Co (N:) this year announced it would exit the heavy truck business in South America, shutting its oldest plant in Brazil, located in the heart of the continent’s auto industry: the city of Sao Bernardo do Campo. Ford said this was necessary to return to profitability in the country, where it has been losing money for years.
While growth is robust, overall sales numbers are still historically low, meaning that growth rates can appear overstated.
“The base is very low, we are coming out of a crisis,” said Luiz Carlos Moraes, a Mercedes Benz executive who is also the president of Anfavea, the auto industry trade group.
