To reduce cars' prices without breaking the law, manufacturers should make deals with their dealers' associations
By Alzira Rodrigues | 5/25/23 | Translated by Jorge Meditsch
Without detailing what was debated at the meeting between President Luiz Inácio Lula da Silva and representatives of the automotive segment, the vice president and minister of Development, Industry and Commerce, Geraldo Alckmin, said the reduction of the price of the cars for consumers could be higher than the 10.79% established as the ceiling of the tax reduction for cars costing up to R$ 120 thousand.
According to Alckmin, direct sales could increase this discount and enable a more affordable brand-new car for the Brazilian consumer. The question is how to make it if the customer doesn’t have a registered business. According to some dealerships, the way out is a brand convention.
The manufacturer should talk with the brand dealers’ association and agree to sell directly one or more models for a determined time.
This alternative is previewed by the Renato Ferrari Law, which regulates the relations between the industry and the retail sector and was successfully used by General Motors in 2000 at the Celta launch. Orders should be online and could be made through a computer available in the dealership.
The brand convention should be the way out for GWM, the Chinese manufacturer that is arriving in Brazil with the proposal of selling only directly.
The difference between this modality and normal sales for physical persons is that the invoice is issued by the manufacturer instead of the dealer. The discount for rental companies, for instance, is about 18%. The IPI (Industrialized Products Tax) is calculated based on the sale’s effective price, not the retail price suggested by the manufacturers.
In direct sales, the dealers normally receive a 6% commission. In traditional retail sales, the value can reach 11%. The prices can be discounted or even increased, depending on market conditions. Last year, when the offer was lower than demand, there were no promotions as today.
It means that sales reduction diminishes the dealers’ margin, a situation that should favor agreements through brand conventions. The market has slowed with the news that the government could take measures to warm the vehicle market.
The manufacturers able to launch the ‘popular car’ more rapidly are Fiat and Renault, which are the only ones that still produce entry models.
In the base version, without power steering and air-conditioned, they cost about R$ 70 thousand. Both manufacturers have strong brand associations, Abracaf (Fiat) and Abrare (Renault). With a discount like the one currently offered for the rentals, the price would go to about R$ 57.4, not considering the tax reduction.
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