Brazilian car market proving lucrative for Hyundai Motor

Hyundai Motor opened a car dealership last month in Campinas, a posh Brazilian city dubbed the South American country`s version of Silicon Valley located northeast of Sao Paulo. The company named the dealership “ANDRETA HMB Campinas.”

On Thursday, the 3,493 square-meter showroom was filled with the HB20, a small hatchback released in Brazil last month. Though it was a weekday and the dealership sells only the HB20, the store was crowded with customers.

More than 50,000 orders for the HB20 have been placed in just three weeks, more than the 45,629 combined units of Hyundai`s 12 models sold from January to September this year in Brazil. The dealership owner said, “My family has sold cars from various brands for more than 44 years, but I’ve never seen this kind of enthusiastic response.”

Hyundai began trial operation of a car factory in Brazil in September with output capacity of 150,000 units per year. Considering that just 26,000 units of the HB20 can be produced by year`s end, buyers must wait a considerable period until they can get their cars.

Encouraged by the popularity of the HB20, Hyundai set a sales goal of 200,000 units in Brazil next year and emerging as one of the top five car brands in the Brazilian market. The carmaker has become one of the bestselling car brands in three of the four BRIC countries, namely Russia, India and China, and the Brazilian car market will likely complete Hyundai’s success in the BRICs market.

○ Sugarcane fuel to run HB20

The HB20’s initial success was drawn from thorough localization. In Brazil, 80 to 90 percent of cars are flex-fuel vehicles that run on gas and bio-ethanol extracted from sugarcane.

Entering the Brazilian market in 1992 by selling 1,400 units of its subcompact Excel, Hyundai began developing the flex-fuel model HB exclusively for the Brazilian market in 2009. HB refers to Hyundai and Brazil, and consumers can choose engines with capacities between 1 and 1.6 liters.

The HB20`s price is as low as 31,995 Brazilian real (15,737 U.S. dollars), which is higher than rivals, such as the Fiat Palio at 28,440 real (13,988 dollars) or the Volkswagen Golf at 27,990 real (13,767 dollars). Yet the HB20 has a competitive edge by applying an air conditioner and an anti-locking brake system to all models and raising the ride height of the vehicle body considering that Brazil has many unpaved roads. The model was selected “2013 Car of the Year” in Brazil, and Hyundai plans to launch the SUV HB20X and a sedan next year.

○ Brazilian car market growing rapidly

Global carmakers are pouring their hearts and souls into the Brazilian car market, which is the world`s fourth biggest. A combined 3.32 million units were sold in Brazil in 2010, more than in Germany, as Brazil jumped from ninth place in 2005 with 1.61 million units. Brazil is expected to assume the No. 3 position behind China and the U.S. with 5 million units sold in 2015.

The Brazilian government began to apply a new policy that imposes a 35-percent tariff on imported cars while giving tax benefits to domestic producers. The amendment to the tax law has led carmakers such as Volkswagen, Toyota and Fiat to secure production facilities in Brazil.

In 2010, Hyundai began building a factory worth 700 million dollars in Piracicaba, Sao Paulo and construction was completed in September this year. Hyundai Motor Group Chairman Chung Mong-koo and Brazilian President Dilma Vana Rousseff attended the ribbon-cutting ceremony Friday to commemorate the Korean carmaker`s production in Brazil.

gene@donga.com