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Brazil Betting on Continuing Car Boom – But Could it go Bust?

Exports down, imports up even with makers boosting capacity by nearly 2 million.

by on Sep.02, 2011

An Opel Astra sold by GM in Brazil.

While the spotlight has been shining on China and India, in recent years, there’s another booming market among the so-called BRIC nations.  Fueled by its fast-growing middle-class, automotive demand in Brazil has been red hot and that’s leading makers to commit to invest billions to boost their production capacity.

But could they heading for trouble?  The good news is that sales bounced back last month after a discouraging June decline.  But even with demand heating up again, some observers wonder whether the market could be facing problems – especially for Brazil’s domestic producers, as importers flood the market and undercut them on price.

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With a population of 190 million, Brazil has become the largest economy in Latin America, in large part due to a 25% growth in its middle class over the past decade.  The Portugese-speaking nation’s economy was on a roller-coaster ride for much of the last decade but recent reforms have been paying off handsomely.