Vehicle sales in Brazil could surpass estimates, impact fuel demand in long term

An atypical rise in vehicle sales in Brazil could be a sign that 2024 figures will surpass estimates of the country’s National Association of Automotive Vehicle Manufacturers, or Anfavea, according to the association. But full-year performance could depend on how interest rates affect fourth-quarter results.

September had the highest daily sales average of 2024, closing the third quarter with 715,000 vehicles sold, according to Anfavea data. Brazilian automotive sales reached the highest sales level of the past five years between January and September, nearing pre-pandemic levels with a 14.1% rise compared with the same period last year.

However, Brazil’s Central Bank increased interest rates from 10.5% to 10.75% in September, indicating the start of a tighter monetary cycle to contain inflation, currently sitting at 4.24%. If the cycle persists, it will raise credit costs on the consumer end, impacting vehicle sales.

“Although there was a rise in September, we still need to monitor October, November and December [in terms of demand],” Márcio de Lima Leite, the association’s president, said during a press conference Oct. 7.

The increase came amid an expected mild growth in diesel demand in the country this year, pushed by a higher biodiesel blending mandate and increased refinery rates. But the sales increase won’t necessarily further raise gasoil demand in the short-term, as part of those comprise a renewal of the fleet rather than additional vehicles on the streets, S&P Global Commodity Insights fuels and refining analyst Joao Lopes said.

“More vehicles can raise fuel demand, but new vehicles are more efficient and consume less fuel," Lopes said. "It is also important to take electric vehicles into consideration, as their share within sales has been rising. There might be some impact, but it will be seen in the long term if this sales rhythm stands for one to two years.”

The demand for diesel and biodiesel has been rising in Brazil for the past six years, with a 3.61% increase in sales of high sulfur diesel and biodiesel from 2022 to 2023 and a 9.39% rise in sales of ULSD in the same period. Conventional gasoline has also seen an increase in sales in the past three years, with a 6.99% increase between 2022 and 2023, surpassing pre-pandemic levels.

Higher vehicle sales were predictable, Leite said: “It just was a matter of knowing when it would happen.”

The September record came at a moment of economic growth, favorable interest rates, decreasing unemployment and suppressed demand for fleet renewal, he added.

Anfavea data released during the Oct. 7 press conference also showed that the diesel-intensive heavy vehicle segment has seen growth of 30.6% in registrations this September compared with the same period in 2023, the most September registrations in the bus segment since 2014.

“We are celebrating the return to normalcy since a tough 2023,” Eduardo Freitas, the association’s vice president, said during the press conference.

On the emerging vehicles end, 2024 started with a rise in registrations, which have since fallen to roughly the same levels as the start of the year, according to Anfavea data. Electric vehicle registrations rose from 4,400 in January to 6,700 in April, now standing at 4,700 in September. Hybrid vehicle registrations rose from 3,900 in January to 4,900 in April, declining to 4,100 in September. Hybrid plug-in registrations reached 5,900 in July after 3,800 in January. For September, the figure was 4,500.

Brazil had over 86,000 electric vehicles imported from China in Q2 2024, enough for about nine months of sales, according to the association’s data.

“The [emerging vehicles] registration data did not show anything extraordinary," Leite said. "Although there is a high stock in this sector, it did not reflect a relevant rise in sales.”

Sales of imported vehicles in Brazil, which comprise a substantial portion of the country’s electric fleet, rose by 35.9% between January and September 2024 compared with the same period in 2023, according to Anfavea. It was the most sales in the segment since 2014.

However, even by 2040, electric vehicles are not likely to take up 100% of Brazil’s national market, Henry Joseph Junior, the association’s sustainability director, during the press conference.

Anfavea’s representatives were scheduled to meet with Brazilian President Luiz Inácio Lula da Silva Oct. 8 to discuss the automotive industry. When questioned by the press about whether a trade agreement between China and Brazil was a possible topic of conversation, Leite said such an agreement was currently “unthinkable” as Anfavea and the Brazilian government are focused on developing the national industry.

Anfavea opposes any trade agreements with China and lobbies for tariffs on imported vehicles.

“In the technological transition we live in, any agreement would put in check our internal development," Leite said. "It could truly delay and impact investments in Brazil."