Tuesday, August 21, 2012

The price of a CAR in Brazil!



I found this video today on a series of YouTube videos called "O Canal do Otario", which translates to "The Sucker Channel".
This particular video uses the Volkswagen Gol as an example of how Brazilian consumers are swindled by excessive taxes and abusive profit margins by Car factories and Car dealers established in the country.
By the way, I just found out Brazil has the largest amount of car factories anywhere in the world, who knew? Interesting fact, and proof that high import tariffs are a by far one of the most successful strategies adopted by the Brazilian government. Even the Chinese are ticked off they can't just import their cars into Brazil and are being pressed to open their car factories in the country and employ locals.
Long story short, the video calls the Brazilian consumer, or actually any consumer in Brazil for that matter, so they might as well be talking to you if you live in Brazil and have bought a car in recent years, and it will make you feel even worse if you bought a Volkswagen Gol.
So, the video goes on to say that a brand new Gol in Brazil costs R$37,000 and change, while the same car considering all import tariffs and shipping goes for R$22,000 in Argentina and for R$18,500 in Mexico. For the same amount you could buy a brand new Chevrolet Camaro in the United States.
Also, it shows that a brand new Volkswagen Gol costs only R$8,5000 to be made, including materials and labor, before taxes, and dealer and factory profits.
So if you would add 100% for taxes, 100% of profit margin for the factory and 100% profit margin for the Volkswagen dealer, you are still at R$32,000, and R$5,000 short of the price of the car for the end consumer in Brazil.
The video announcer goes on to say that he is not picking on Volkswagen in particular, he just chose the Gol as an example because it has been the NUMBER 1 car sold in Brazil for the past 25 years and it is also exported to a large number of countries around the world.
However the example is similar to all car companies with established manufacturing plants in the Brazilian territory, and in case you are not aware (like I wasn't before watching this video), they are the following:

Volkswagen, Ford, General Motors, Fiat, Mitsubishi Motors, Citroen, Peugeot, Nissan, Hyundai, Honda, Mercedes Benz, Chevrolet, Toyota, IVECO, Renault, BMW, Audi, Chrysler, Dodge and the list goes on... *this list is just for Car factories, it doesn't apply for buses or trucks.

The video ends with a plea for consumers to avoid buying cars and walk, use a bicycle or public transportation instead, saying it is better for your health and your pocket.

I noticed the Portuguese in the video is very clear so I decided to post anyway, it might be a good training if you are a Portuguese beginner.

Enjoy

Abracos

Ray

11 comments:

Rachel said...

I will avoid buying cars but mainly because I can't afford to ;)

American Heart Brazilian Soul said...

Rachel,

I hear you, and I think by buying a used car, we are avoiding to fall for the high price trap...well, sort of ;)

Abracao

Ray

Lindsey said...

That is NUTS!
I must say, we bought a used car when we first got to Brazil and it wasn't that much better... 2002 Celta for R$12,500. Not too cheap!

American Heart Brazilian Soul said...

Lindsey,

We have such a funny story about a Celta we rented a few years ago at the Sao Paulo airport.
First, our large suitcases just wouldn't fit in the car, we tried every possible position and the doors wouldn't shut!!
What a tiny little car, not even wide enough for a suitcase, I know it was a large, put pleeeease, the doors wouldn't shut!
We had to drive with one of the doors open all the way back to the Hertz rental office and get an upgrade to a Ford Focus, so we could fit our luggage!!!
Brazilian cars used to be normal sized when I was growing up, but something must have gone terribly wrong sometime in the mid 90's and they started to shrink more and more...
Yikes, R$12,500 for a tiny 2002 Celta sound absurd!!
Good think you are back in Canada, now you can splurge on a LARGE anything for not much ;)

Abracos

Ray

Born Again Brazilian (not religion, just Brazilian) said...

I thought the ridiculously inflated price of a car was due to duties/taxes, etc. But then, I met someone who worked for one of the car companies and explained that most of the production happened in Brazil, with perhaps some parts being manufactured in Mexico. My Brazilian business students explained to me that it was not taxes, that companies just take advantage of the market and raise prices to the level of what people are willing to pay.

Renato S. Alves said...

Ray
This is an excellent video. Thank you for posting.
But I have to disagree with the Born Again in Brazil's business students. While in the US we pay around 6.0% of taxes for a car, the video shows (4:40) that the amount of taxes in Brazil for a car can get up to 100% of the manufacture cost because of the "efeito cascata".
The thing gets worse if you think that after the car price is set, you also pay 4% of the final price on IPVA. But part of this amount (final price) was taxes! So you pay taxes of taxes.
Than the car factories, dealerships, etc.
Some time ago, the government announced that they were going to raise the taxes for imported vehicles in the beginning of the next month. Instead of not buying imported cars anymore, what did Brazilians do? They ran to buy the cars and the market had a record of sales. :(
If I have to live in Brazil again I will rent an apartment in front of my job and I will never buy a car again.
Tks

American Heart Brazilian Soul said...

B.A.B,

You friend is correct, Brazil actually has laws demanding that if a car company starts production in Brazil it needs to manufacture over 90% of the auto parts in Brazil. Sometimes they open exceptions for new car factories and allow them to start production at 70% national parts and give them a scheduled time to nationalize up to 90% of the auto parts they use.


Ray

American Heart Brazilian Soul said...
This comment has been removed by the author.
American Heart Brazilian Soul said...

Renato,

B.A.B.'s students are correct and you are correct as well.
Taxes in Brazil are absurdly high, but Brazilian car company's profits is also abusive high.
According to the video's explanation, the Volkwagen Gol cost around R$8,000 to be made, including labor and auto parts, then even if you add the 100% tax, the price of the VW Gol should be
R$16,000 but they charge R$37,000 for the Volkswagen Gol, and they do it so because Brazilians cough up the ridiculous amount of cash, for a ridiculous ugly and not so safe little car (if you ask me).
But I think Brazilian cars will improve a lot in the near future and there will be increasing pressure forcing the prices go down.


Thank you for your comment

Abracos
Ray

Toby said...

The price of cars here is ridiculous. It makes no sense. Thanks for posting this. I bought a used VW GOL when we got here...Got a good deal compared to what they cost.

Not to mention that if you have power anything, steering, windows a radio the price goes up even more.

It's crazy!

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