1. mercado de autopartes en brasil, roberto pagano

1
BRAZILIAN OEM AUTOPARTS SCENARIO
Elaborated by: ROBERTO PAGANO (Roma Consulting) July 2013

2
1. Global automotive market forecast
• Worldwide forecast (2012-2016)
• South America forecast (2013-2017)
2. Brazilian automotive outlines - 2012
• Automotive macro data
• Investments for automotive
• Autovehicles production & sales
• Autovehicles import / export
• Carmakers ranking
• Carmakers plants (current and new entries)
3. Brazilian automotive market trends
• Sales & production trends
• Main key factors
• Brazilian forecast (2013-2017)
4. Brazilian autoparts industry - 2012
• Autoparts industry performance
• Sales & investments
• Companies profile
• Autoparts import / export & trade balance
• Aftermarket
• Financial indices
5. Foreign autoparts suppliers coming in Brazil
• Opportunities
• Barriers
• Business models
• Needed profiles
6. Debriefing
• Conclusions
• Questions & Answers
Purposes ✓ measure the Brazilian automotive market and to evaluate the market trends
✓ map the current OEM Brazilian autoparts industry and evaluate its evolution
✓ underline the key factors for a foreign autoparts company coming in Brazil
Target ✓ foreign autoparts companies for developing OEM business in Brazil
Presentation Summary

3
1. Global automotive market forecast
• Worldwide forecast (2012-2016)
• South America forecast (2013-2017)

4
Asia
40,8
50%
Europe
19,2
24%
North
America
14,9
18%
South
America
4,5
6%
Africa /
M.E.
2,0
2%
Asia
50,1
52%
Europe
21,1
22%
North
America
17,5
18%
South
America
5,5
6%
Africa /
M.E.
2,4
2%
Asia
34,1
42%
Europe
18,7
23%
North
America
17,5
22%
South
America
5,8
7%
Africa /
M.E.
4,6
6%
Asia
43,4
45%
Europe
20,3
21%
North
America
19,6
21%
South
America
6,9
7%
Africa /
M.E.
5,5
6%
1 - Global automotive market forecast
Worldwide forecast (2012-2016)
Source: IHS – OICA - ROMA
20162012
0
10
20
30
40
50
2012 2013 2014 2015 2016
Worlwide sales (million units)
Asia
Europe
North America
South America
Africa / M.E.
2102 2016
WORLDWIDE 81 million 95 million +18%
SOUTH AMERICA 5,8 million 6,9 million +19%
2102 2016
WORLDWIDE 82 million 97 million +19%

South America forecast (2013-2017)
Source: IHS - ROMA
0
1
2
3
4
5
6
7
2013 2014 2015 2016 2017
South America produc on (million units)
Others
C segment
B segment
A segment
 According to IHS, the segmentation of the South
America production in 2013-2017 will be as shown at
the side, where:
 A segment + 115% up to 0,8 million units in 2017
 B segment + 15% up to 3,1 million units in 2017
 C segment + 36% up to 1,6 million units in 2017
 Others + 19% up to 0,2 million units in 2017
0,0 1,0 2,0 3,0 4,0
Brazil
Argen na
Chile
Colombia
Peru
Venezuela
Equador
Paraguay
Bolivia
million units
Domes c sales 2012
2011
0,0 1,0 2,0 3,0 4,0
Brazil
Argen na
Chile
Colombia
Peru
Venezuela
Equador
Paraguay
Bolivia
million units
Produc on 2012
2011

6
2. Brazilian automotive outlines - 2012
• Automotive macro data
• Investments for automotive
• Autovehicles production & sales
• Autovehicles import / export
• Carmakers ranking
• Carmakers plants (current and new entries)

72 - Brazilian automotive market outlines - 2012
Automotive macro data
 ANFAVEA members
 AGCO do BRASIL
 AGRALE
 CAOA Hyundai
 CATERPILLAR BRASIL
 CNH LATIN AMERICA
 DAF PACCAR
 FIAT AUTOMOVEIS
 FORD MOTOR COMPANY
 GENERAL MOTORS do BRASIL
 HONDA AUTOMOVEIS do BRASIL
 HYUNDAI MOTOR BRASIL
 INTERNATIONAL
 IVECO LATIN AMERICA
 JOHN DEERE BRASIL
 KARMANN GHIA
 KOMATSU do BRASIL
 MAHINDRA Bramont
 MAN LATIN AMERICA
 MERCEDES-BENZ do BRASIL
 MITSUBISHI – MMC do BRASIL
 NISSAN do BRASIL
 PEUGEOT CITROEN do BRASIL
 RENAULT do BRASIL
 SCANIA LATIN AMERICA
 TOYOTA do BRASIL
 VALTRA do BRASIL
 VOLKSWAGEN do BRASIL
 VOLVO do BRASIL
Source: ANFAVEA
 Companies
 28 carmakers with 58 plants
 over 500 autoparts main industries
 over 5100 dealers
 sectorial ≈ 200.000 companies
 Production capacity
 Autovehicles: 4,5 million
 Agricultural: 110 thousand
 Economics
 Revenues: US$ 107 billion
 GDP share: 5% x total & 21% x industrial
 Tributes generation: US$ 25 billion
 Foreign market: export: US$ 23 billion – import: US$ 33 billion
 Investments: US$ 68 billion
 Employment: 1,5 million people
 Fleet
 over 38 million vehicles operating
 with a ratio of 5 habitants per vehicles (being US = 1,2 and Europe = 1,8)
 with an average fleet age of 8,8 years:
0% 10% 20% 30% 40% 50%
over 20 years old
16 to 20 years old
6 to 15 years old
up to 5 years old
–
passenger cars
light commercials
trucks
bus
1990 1995 2000 2005 2010
40 –
20 –
10 –
30 –
0 –
1960
VEHICLES FLEET

8
Source: ANFAVEA
Investments for automotive – 1980/2012
0
1.000
2.000
3.000
4.000
5.000
6.000
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Automo ve Investments
(US$ million)
The investments planned in 2013 ÷ 2015 would be significantly higher, mainly for:
 Carmakers: new plants or capacity improvement & new vehicles
 Autoparts: capacity improvement & new products
 New plants of new foreign carmakers and suppliers (mainly from China)

9
795.065 21% x sales
442.075 13% x product
2.900.542 87% x product
857.901 24% x sales
578.728 17% x product
2.853.865 83% x product
3.432.593 Internal Market
Sales
3.633.248
Import
Export
Production
BRAZILIAN AUTOMOTIVE 2012
BRAZILIAN AUTOMOTIVE 2011
Import
Export
Production
Sales
Internal Market3.342.617
3.802.071
2 - Brazilian automotive market outlines – 2012
Autovehicles production & sales
+2%
+5%-3%
-7%-7%
Source: ANFAVEA
WORLDWIDE AUTOMOTIVE RANKING
 7th producer
 4th domestic market

After years of good growth, the sales slowed down considerably since 2011
Source: ANFAVEA
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
4,0
2006 2007 2008 2009 2010 2011 2012
HISTORICAL SALES (million units)
and CAGR (Compounded Annual Growth Rate)
+ 16%
+ 3%

Source: ROLAND BERGER – ROMA
REASONS FOR CURRENT MARKET WEAKNESSES
ECONOMIC
SLOWDOWN
FINANCING
RESTRICTION
INCREASED USED
CARS MARKET
EURO 5
IMPLEMENTATION
NOx and PM emissions standards
for diesel vehicles in Brazil
 GDP growth have come to a
stall on the recent past
 Reflects global financial
situation
 Unfavourable financing
conditions due to global crisis
 Higher interest rate for car
credits
 Increasing used cars market
in direct competition with new
cars market
 Residual price uncertainties
In Jan 2012 the standards moved
from Euro3 to Euro5, with:
 a strong pre-buy effect in 2011
 consequently a lower trucks
demand in 2012
2010 2011 2012
GDP – Growth Brazil
Car credit
(R$ million)
Used cars market
(million units)
However, the 2013 first half was the historical best half, with a sale of 1.8 million units,
4.8% more than in the same period of last year.
IMPACT

Autovehicles import / export
0
100.000
200.000
300.000
400.000
500.000
600.000
Passenger Cars Light
Commercials
Trucks Bus
Import & Export 2012 (units)
IMPORT
EXPORT
 The balance continues to worsen, confirming such trend since 2008.
 The import was supported by the success of the Korean and Chinese vehicles and of the SUV’s.
 The export was supported mainly by the sales in Latin America.
The negative balance was one of the main factor of the production downturn in 2012
Source: ANFAVEA
0
100.000
200.000
300.000
400.000
500.000
600.000
700.000
800.000
900.000
1.000.000
2012 2011
Import & Export (units)
IMPORT
EXPORT

13
Sources: ANFAVEA – IG CARROS
Carmakers ranking – sales
2,0%
0,4%
0,5%
1,1%
1,7%
2,9%
3,0%
3,1%
3,7%
4,0%
6,6%
8,9%
17,7%
21,3%
23,1%
0% 5% 10% 15% 20% 25%
Others
CHERY
JAC
KIA
MITSUBISHI
NISSAN
HYUNDAI
TOYOTA
HONDA
PSA
RENAULT
FORD
GM
VW-AUDI
FIAT
Passenger Cars & Light Commercials
 Fiat + VW + GM (the “Big Threes”) together account for 62% of sales (it was 75% in 2006).
 Fiat confirms its leadership in sales for the 11th consecutive year.
 VW Gol is the best-selling “car family” (and the VW Gol hatch is the best-seller car for the
25th consecutive year).
0 100.000 200.000 300.000 400.000 500.000
Ford Ka
GM Cobalt
Ford Fiesta
GM Celta
GM Corsa
Renault Logan
VW Fox
Fiat Uno
Fiat Palio
VW Gol
Best-selling “car families”
“Big Threes”
= 62%

14
Sources: ANFAVEA – IG CARROS
Carmakers ranking – production
Passenger cars & Light commercials
 FIAT + VW + GM (the “Big Threes”) together account for 69% of cars production (75% in 2006).
 MAN + MERCEDES + FORD together account for 70% of trucks & bus production (76% in 2006).
 Note the merge, occurred in end 2008, of the trucks & bus operations between MAN and VW.
Trucks & Bus
0,2%
1,0%
1,2%
1,6%
2,0%
3,1%
4,2%
7,8%
8,4%
19,0%
25,3%
26,3%
0% 5% 10% 15% 20% 25% 30%
Others
Nissan
Mitsubishi
Hyundai
Toyota
PSA
Honda
Renault
Ford
GM
Fiat
VW
0,3%
3,3%
7,1%
9,2%
11,4%
13,8%
26,9%
28,1%
0% 5% 10% 15% 20% 25% 30%
Others
Agrale
Iveco
Scania
Volvo
Ford
Mercedes
MAN-VW

15
Source: ROMA
Carmakers plants (current and new entries)
RIO GRANDE DO SUL = 9 + 1
AGCO INTERNATIONAL
AGCO JOHN DEERE
AGCO JOHN DEERE
AGRALE TOYOTA
GM SHIYAN
PARANÁ = 5 + 2
CATERPILLAR VW
CNH VOLVO
FIAT CATERPILLAR
RENAULT PACCAR-DAF
NISSAN
MINAS GERAIS = 4 + 1
CNH MERCEDES
FIAT CNH
IVECO
BAHIA = 1 + 2
FORD JAC MOTORS
JOHN DEERE
CEARÁ = 1 + 0
FORD (TROLLER)
PERNAMBUCO = 1 + 4
GM FIAT
XCMG FIAT
SHAANXI HEAVY DUTY
GOIÁS = 3 + 1
HYNDAI CAOA MITSUBISHI
JOHN DEERE SUZUKI
AMAZONAS = 1 + 0
MAHINDRA
RIO DE JANEIRO = 2 + 3
MAN NISSAN
PSA FOTON
HYUNDAI MACHINERY
SANTA CATARINA = 0 + 2
BMW SINOTRUCK
ESPIRITO SANTO = 0 + 1
SSANGYONG/CHANGAN/HAIMA
SÃO PAULO = 29 + 9
AGCO
AGCO
CATERPILLAR
CNH
CNH
FORD
FORD
FORD
GM
GM
GM
GM
GM
HONDA
HYUNDAI
IVECO
JOHN DEERE
KARMANN GHIA
KOMATSU
KOMATSU
MERCEDES
MERCEDES
SCANIA
TOYOTA
TOYOTA
TOYOTA
VW
VW
VW
CHERY
DOOSAN INFRACORE
JCB
JOHN DEERE
JOHN DEERE / HITACHI
KIA
SANY GROUP
SCANIA
TOYOTA
SERGIPE = 0 + 1
AMSIA
≈ 1.000 Km
0 5 10 15 20 25 30 35 40
SP
MG
PR
SC
RS
GO
RJ
BA
PE
CE
ES
SE
AM Carmakers plants
EXISTING 2012
NEW PLANTS
TOTAL FORECAST IN 2016: 85 plants
 58 existing plants (updated end 2012)
 27 new plants (planned 2013-2016):
 7 from China:  Chery
• Foton
• JAC
• Shaanxi
• Shiyan
• Sinotruck
• Ssangyong
 2 from US:  Amsia
• Paccar DAF
 1 from Germany:  BMW
 1 from Korea:  Kia
 1 from Japan:  Suzuki

16
3. Brazilian automotive market trends
• Automotive Sales & Production trends
• Brazilian forecast (2013-2017)

173 - Brazilian automotive market trends
Sales & Production trends
Source: ROLAND BERGER – FMI – BANCO CENTRAL - IBGE
The future growth of the Brazilian automotive
industry is based on three fundamental trends
1 ECONOMIC DEVELOPMENT
The GDP in Brazil will return to former growth, mainly driven by
stable inflation and controlled interest rates
2 INCREASING SPENDEABLE INCOME
The positive economic development will increase the number of
households that can afford to buy a car
3 MEGA-EVENTS & MEGA-CONSTRUCTIONS
The upcoming events (like World Football Cup and
Olympic Games) and energy and infrastructure
investments will increase demand in the next
years
1)
1) PIB = GDP – IPCA = inflation rate – SELIC = official interest rate
2) Number of householders with spending power > R$ 28.000 per year
0%
2%
4%
6%
8%
10%
12%
14%
jan/11
PIB IPCA SELIC
2011 2014e2013e2012
AUTOMOTIVE SPENDING POWER (million households) 2)

183 - Brazilian automotive market trends
Main key factors
Source: ROLAND BERGER – ROMA
 Increase of IPI (“industrial product tax”) for all
vehicles sales by 30 points, with reduction up
to 0 for locally produced vehicles.
 Re-negotiation of free trade agreements with
foreign Countries (Mexico, Argentina, etc.).
 Lower interest rates for FINAME financing with
local content requirements & better conditions
for financing the vehicles purchase (ex.
commercial vehicles, trucks):
 Higher competition and newcomings will imply
wider offer at lower prices.
 Forecast of sustained demand from the
emerging middle class.
 Establishing programs to encourage exports.
1) Salary including benefits and social charges
 High and strongly increasing labour cost.
 Lower productivity as other automotive
Countries.
 High cost of “doing business in Brazil”, like
energy, logistics, bureaucracy, taxes, …
(the so-called “custo Brasil”):
 Unfavourable exchange rate.
 Heavy burden on import taxes and significantly
complex operations for importing.
 Uncertainties about the solidity of the real
economy in the coming years.

Brazilian forecast (2013-2017)
Source: IHS – OICA - ROMA
2102 2017
BRAZIL 3,7 million 4,4 million +21%
0
1
2
3
4
5
6
7
8
2013 2014 2015 2016 2017
Brazilian sales (million units)
South America
Brazil
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
4,0
4,5
5,0
2013 2014 2015 2016 2017
Brazilian sales (million units)
Others
C segment
B segment
A segment
2102 2017
BRAZIL 3,3 million 4,3 million +31%
0
1
2
3
4
5
6
7
2013 2014 2015 2016 2017
South America produc on (million units)
Others
C segment
B segment
A segment

20
4. Brazilian autoparts industry – 2012
• Autoparts industry performance
• Sales & investments
• Companies profile
• Autoparts import / export & trade balance
• Aftermarket
• Financial indices

21
Source: SINDIPEÇAS
4 - Brazilian autoparts industry - 2012
Autoparts industry performance
1) SINDIPEÇAS: Sindicato Nacional da Industria de Componentes para Veículos Automotores
2) ABIPEÇAS: Associação Brasileira da Industria de Autopeças
 Companies  over 500 companies associated to SINDIPEÇAS1) and ABIPEÇAS2
•over 700 autoparts main plants
• sectorial ≈ 200.000 companies
 Economics  Revenues: US$ 42 billion
 69% assemblers OEM’s
 15% aftermarket
 9% export
 7% intrassetorial
• Foreign market:
 export: US$ 10,4 billion
 import: US$ 16,3 billion
• Investments: US$ 1,9 billion (4,5% on sales)
• Employment: total 218 thousand people
 hourly workers: 142 thousand people
 white collars: 76 thousand people
69%
15%
9%
7%
2012 SALES PER DESTINATION
Carmakers
A ermarket
Exports
Intrassetorial
0
4
8
12
16
20
2008 2009 2010 2011 2012
TRADE BALANCE (US$ billion FOB)
EXPORT IMPORT
0
50
100
150
200
250
2008 2009 2010 2011 2012
EMPLOYEES (thousand workers)
White Collars Hourly Workers
+18%
+8%
+8%
 OEM autoparts market forecast,
without export (R$ billion)

Sales & investments
__________________________________________________________________________________________________________
_
NET SALES
FOREIGN
CAPITAL
NATIONA
L
CAPITAL
76%48% 52%
24%
72%
28%
48% 52% 86%
14%
66%
34%
1994 2002 2012
 The national industry is losing strength
and is reacting by investing more
2012 net sales:
US$ 42 billion
2012 investments:
US$ 1,9 billion
__________________________________________________________________________________________________________
_
INVESTMENTS
__________________________________________________________________________________________________________
_
__________________________________________________________________________________________________________
_
Source: SINDIPEÇAS

23
0 200 400 600 800 1.000 1.200 1.400 1.600 1.800
22) Master
21) Autometal
20) Tower
19) Sifco
18) Fras-Le
17) Takata Petri
16) Tenneco
15) Moura
14) Plascar
13) Suspensys
12) Aethra
11) Vipal
10) TRW
9) Cummins
8) Delphi
7) ZF
6) Maxion
5) Valeo
4) Mahle
3) Magne Marelli
2) Eaton
1) Bosch
Source: Exame Maiores e Melhores 2012
Companies profile
 The top 10 companies together
account for 24% of total market
revenues.
 The top 22 companies together
account for 33% of total market
revenues.
Only 22 autoparts companies achieve each one a net revenue higher than US$ 100 million:
Just 5 of the first 22 companies are controlled by national capital (# 11 - 12 – 13 - 19 – 22)

24
10,2%
4,0%
7,5%
3,1%
19,6%
9,5%
16,5%
10,2%
22,1%
20,6%
10,0%
16,6%
5,0%
7,1%
9,0%
29,0%
2001
2011
up to
R$ 3.000
R$ 3.000 to
R$ 5.000
R$ 5.000 to
R$ 10.000
R$ 10.000 to
R$ 20.000
R$ 20.000 to
R$ 50.000
R$ 50.000 to
R$ 100.000
R$ 100.000 to
R$ 150.000
higher than
R$ 150.000
Companies profile
Number of companies by level of revenues
Revenues of small and
medium sized
companies are shrinking,
while large companies
grow.
Source: SINDIPEÇAS
16,6%
10,2%
20,6%
16,6%
7,1%
24,6%
4,4%
0% 5% 10% 15% 20% 25% 30%
up to 5
5 to 10
10 to 25
25 to 50
50 to 75
75 to 100
over 100
Revenues(US$million)
0%
10%
20%
30%
40%
small medium large
Classifying small / medium / large sized companies
using the usual thresholds of 10 and 50 US$ million of
revenues, the companies distribution is rather
balanced.
Evolution

Companies profile
Distribution by employees number
Classifying small / medium / large sized
companies using the usual thresholds of
50 and 500 employees, the medium
companies are more than half.
Note that only 6,5% are companies with
more than 2000 employees.
5,0%
8,8%
18,6%
18,0%
21,3%
13,4%
8,4%
3,8%
2,7%
0% 5% 10% 15% 20% 25%
up to 30
30 to 60
60 to 125
125 to 250
250 to 500
500 to 1000
1000 to 2000
2000 to 4000
over 4000
(employees)
0%
10%
20%
30%
40%
50%
60%
70%
small medium large
Source: SINDIPEÇAS
Quality Certifications
0 50 100 150 200 250 300 350
AVSQ
BS 8800 / OHSAS
EAQF
ISO 14001
ISO 9011
ISO TS 16949
SA 8000
VDA 6.1/6.3/6.4
Number of cer fica ons
945 certifications
106 in process
Quality certification is a prerequisite for suppliers

Autoparts import / export & trade balance
-6
-3
0
3
6
9
12
15
18
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
(US$billion)
IMPORT
EXPORT
BALANCE
 With the global crisis in 2008, Brazil became the destination for autoparts produced abroad, such
as Germany, China and Korea, which worsened in later years reaching negative balance of US$ 5,8
billion in 2012.
 Recently the Brazilian Government launched a new automotive regime, favoring a higher content of
local components.
Source: SINDIPEÇAS

Autoparts import / export & trade balance
Source: SINDIPEÇAS
representing 94% of the total exportations
List of the first 20 destinations:
representing 93% of the total importations
List of the first 20 origins:
0,0 0,5 1,0 1,5 2,0 2,5 3,0 3,5 4,0
Poland
Austria
Indonesia
Czech Republic
Turkey
Romania
UK
India
Spain
Sweden
Mexico
Italy
Thailand
South Korea
France
Argen na
China
Germany
Japan
US
(US$ billion)
IMPORT 2012
0,0 0,5 1,0 1,5 2,0 2,5 3,0 3,5 4,0
India
Sweden
Russia
Uruguay
Paraguay
France
Peru
UK
Italy
Thailand
China
South Africa
Colombia
Chile
Netherland
Venezuela
Germany
Mexico
US
Argen na
(US$ billion)
EXPORT 2012
!2,5%!2,0%!1,5%!1,0%!0,5% 0,0%
US%
Spain%
Sweden%
Italy%
Thailand%
France%
Germany%
South%Korea%
China%
Japan%
!%TRADE%%
BALANCE%

Aftermarket
Source: ROLAND BERGER - PIT STOP
OES
IAM
2010 2011 2012 2013 2014 2015 2016 2017
6,4
7,3
8,2
9,1
10,0
10,8
11,7
12,6
Brazilian automotive
aftermarket forecast 1)
(EUR billion)
1) excluding tires
GROWTH DRIVERS
 Growing users spendable income,
enabling more maintenance and
repairs
 Grow of the fleet at > 5% per year
 Higher-value fleet with more features
and options
 Regulatory controls and warranty
changes
 Changes in users behaviour towards
more preventive maintenance
AFTERMARKET CHARACTERISTICS
 Despite the growing of the OES share, the aftermarket continues to be dominated by the IAMs.
 The data above are referred to the “official scenario”, but there is a big “parallel independent”
market, which size is estimated by other sources in up to the double than the official data. Such
parallel market is supplied by small local producers and by imported parts (mainly from Far East).
 Sizing figure: 35.000 retailers, 120.000 workshops and 1 million direct employees.

Financial indices
NOTE: Financial indices
The following informations have been elaborated by ROMA from public
sources and also using data from an economical and financial study
accomplished by Serasa Experian, who analysed the combined financial
statements in US dollars, from 2009 to 2011, of 277 main companies
associated to Sindipeças and Abipeças, representing around 50% of the
total gross revenues in 2011.
The following data are showed:
 Production cost structure
 Profit & Loss
 Profit on sales
 Financial figures
Source: ROMA – SERASA EXPERIAN

Financial indices
PRODUCTION COST STRUCTURE
Other costs
Manpower
Materials
0
4%
8%
12%
16%
CHANGE IN
PRODUCTION COST
CHANGE IN
PRODUCTION COST
Other costs
Manpower
Materials
16%
12%
8%
4%
0
100%
80%
60%
40%
20%
0
2005 2006 2007 2008 2009 2010 2011 2012
-2%
0%
2%
4%
6%
8%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
PROFIT
ON SALES
1,0
1,2
1,4
1,6
1,8
2,0
2009 2010 2011
GROWTH
INDEX
OPERATING REVENUES
GROSS PROFIT
OPERATING PROFIT
NET INCOME
0%
3%
6%
9%
12%
15%
18%
0
5
10
15
20
25
30
2009 2010 2011
%onrevenues
US$billion
OPERATING REVENUES
% GROSS PROFIT
% OPERATING PROFIT
% NET INCOME
 In spite of
• the sustained growth of the revenues (at average rate of 30% per year) and
• the maintenance of the gross profit at 14-15% of the revenues,
the profitability shows signs of weakening
(confirmed by various samples investigated in 2012).

Financial indices
FINANCIAL FIGURES
0%
2%
4%
6%
8%
10%
0
300
600
900
1.200
1.500
2009 2010 2011
INVESTMENTS
US$ million
% on sales
0%
5%
10%
15%
20%
0
500
1.000
1.500
2.000
2.500
2009 2010 2011
LOAN & FINANCING
US$ million
% on sales
0%
5%
10%
15%
20%
1.000
1.500
2.000
2.500
3.000
2009 2010 2011
WORKING CAPITAL NEEDS
US$ million
% on sales
2010 2011
50 days 48 days
AVERAGE INVENTORY
TURNOVER
2010 2011
56 days 55 days
AVERAGE PERIOD
PURCHASES PAYMENT
2010 2011
47 days 45 days
AVERAGE PERIOD
SALES COLLECTION
0
2.000
4.000
6.000
8.000
10.000
2009 2010 2011
NET TOTAL DEBT
Long term debt
Short term debt

32
Source: ROMA
Main key factors
KEY PRODUCTS EVOLUTION
 QUALITY PRODUCTS
Products performance and reliability more and more aligned to the international standards.
 LEGISLATION
Safety and pollution rules will progressively reach the US / European standards.
 PRODUCT TRENDS
New products share increases, like:
• ABS at 100% of production in 2014 (today is 60%)
• Air-bag at 100% of production in 2014 (today is 60%)
• Air conditioning at more than 90% of production in 2016 (today is 75%)
• Electrical power steering will increase significantly in the next years (negligible today)
• Engine downsizing and turbo chargers starting from 2016
• Automatic and AMT transmissions will increase significantly in the next years
• Infotainment and GPS’s systems will increase significantly in the next years
• …

33
Source: ROMA
Main key factors
COMPANIES PROFILE EVOLUTION
Local automotive suppliers have to prepare for the expected growth and at the same
time increase efficiency in their operations.
 GROWTH
• Consider the impact of new local content requirements
• Handle increasing products and technologies specifications and requirements
• Prepare for the expected growth in production volumes
 EFFICIENCY
• Price pressure from OEMs
• Compensate high increases in labour and other factors cost
• Keep indirect structures lean to not harm profitability
• Define the right industrial footprint
BIGGER & LEANER

Main key factors
COMPETITION
 CURRENT SCENARIO
The local supplier park is one of the widest, where are competing American, European and Asian
global suppliers, besides the Brazilians.
Such global suppliers also tend to provide their non-traditional customers.
 NEW COMPETITORS
The new incomings OEMs are bringing their home suppliers to Brazil, further increasing local
competition.
Such new “home suppliers” need to extend the local customer base, to achieve reasonable size
and profitability.
 PRICE PRESSURE
Increasing production cost cannot be passed on to OEMs.
The imported parts, from low-cost countries, define the market price.
 OEMs POLICY
The main OEMs are focusing suppliers with the following profile:
• international suppliers with a local reasonable size
• certified suppliers: at least ISO14001 (mandatory) and ISO16949 (recommended)
• good quality performance together with high competitiveness
Source: ROMA

35
• Opportunities
• Barriers
• Business models
• Needed profiles

Opportunities
Source: SINDIPEÇAS - ROMA
 MARKET GROWTH
The automotive suppliers market, without export, will growth
up to 15% per year in the next five years.
 IMPORTED PARTS
Possibility to supply imported parts, despite the customs barriers, for “niche” products.
“Niche” products:
• technologies not available in Brazil
• high competitiveness (= price)
• global components, supplied also outside Brazil
 NEW SUPPLIERS
OEMs are available to insert new suppliers, if competitive.
The higher renovation speed of the vehicles models allows
to new suppliers participating in bids for new products.

Barriers
Source: ROMA
 CULTURAL DIFFERENCES
 CUSTOM BARRIERS & IMPORT PROCEDURES
 LOGISTICS & SERVICES PROVIDERS
 LOCALIZATION & PROXIMITY TO THE CUSTOMER
 COMPETITIVENESS vs. “CUSTO BRASIL”
 START-UP TIMING vs. BUREAUCRAZY

Business models
Source: ROMA
can be planned for autoparts suppliers coming in Brazil,
depending of the nature and the target of each supplier.
TWO DIFFERENT BUSINESS MODELS
 Market analysis to identify the business opportunities.
 Constitution of a local company, together with a
Brazilian entity (person or company) who will be the
legal representative.
Such local company will be “commercial &
importing”.
 Implantation of the organisation of such local
company, with:
 commercial structure,
 technical services for pre/after-sales,
 quality services,
 logistic structure,
 administration services.
 Start-up of import and distribution operations.
 Depending on the nature of the imported
products, gradually the local structure may carry out
some additional technical operations, using Brazilian
subcontracted suppliers, if any.
 Market analysis to identify the business opportunities
 Constitution of a local company, together with a
Brazilian entity (person or company) who will be the
legal representative.
Such local company can be “service provider”.
 Implantation of the organisation of such local
company, with commercial and administration
services.
 Plan for the establishment of local manufacturing
base, which can be realized in two alternative
workarounds:
 own investment, with resources and competences
from the headquarter; or
 partnership with a Brazilian company, with
homogeneous skills and productive means.
 Structuring the operating organization, alone or with
the local partner.
 Start-up of the local operations, eventually using
some semi-finished components coming from the
headquarter.The two models above
can be complementary

Business models
Source: ROMA
Localisation of
subcontracted
possible
operations
Start-up:
import and
distribution
Implantation of
the import &
commercial
organisation
Start-up:
local
production
Structuring the
operating
organization
Definition of
the local
industrial
base
Implantation of
the local services
organisation
Constitution
of the local
company
Market
analysis to
identify the
business
opportunities

Needed profiles
 Due to the high local competition, a differential in products or technologies should be provided, in order to offer a
real competitive edge to the customer.
 At least, a high competence/experience in the automotive supply should be demonstrable, together with a good
competitiveness.
 Regarding the offered products, the involved manufacturing technologies should be dominated internally.
 A best-in-class quality’s organisation and results should be demonstrable in the headquarter organization, together
with the willing to transfer the same standards in Brazil.
 A local organization should be built up in Brazil, together with an effective support system from the headquarter.
 An efficient organization for offers elaboration should be planned, in order to assure quick and professional answers.
 The local logistics should be suited to handle rapid delivery systems, like “Just In Time” or “Milk Run”.
 For imported components, a local warehouse should be planned, in order to ensure a local stock for contingency.
Source: ROMA

Needed profiles
Source: ROMA
 Brazil is a complicated country to do business, with its habits and rules that newcomings must understand and
assimilate quickly.
 Newcomings should be:
- open mind and flexible in decision making and operational processes
- open to adapt to different management and negotiation methods
- available to adapt to different operating speeds
- able to enter into the local mentality and make good use of it
- determined and focused to the result, but patient
- well organized and planned
 Business planning and market informations is one of the major factors for the success of the project, together with
the obvious competitiveness.
 A recent study, made by IPBT (Instituto Brasileiro de Planejamento Tributário) on the recent companies of all sectors,
showed that 15% of companies closed in the first year and 42% in the first five years of life, caused by:
- 42% lack of planning and market information
- 17% tax complexity and bureaucraticy
- 15% difficult to access credit and financial investments
- 12% high cost and complex management
- 7% quarrels between the partners
 Due to the complexity of the Brazilian procedures and bureaucracy, a competent organisation should be locally
planned. with en efficient link with the headquarter.
 In general, the Brazilian is not a good administrator. So it is necessary to pay attention to the financial and operating
management.

42
6. Debriefing
• Conclusions
• Questions & Answers

436. Debriefing
Conclusions
Source: ROMA
+
−
 Brazilian automotive market continues to grow,
sustained by good economic outlook.
 The local autoparts market will grow even more.
 Brazilian government is acting to promote local
production.
 OEMs privilege international suppliers with
reasonable size and high competitiveness.
 Quality levels are aligning to international
standards.
 Wide competition and high pressure on costs /
prices.
 Good opportunities for newcomings to enter
Brazil.
 Doing business in Brazil is not easy
(but 72% of sales is made by foreign-controlled
suppliers).
Foreign autoparts suppliers coming in Brazil

446. Debriefing
Questions & Answers
ROBERTO PAGANO
ROMA CONSULTING ASSESSORIA COMERCIAL LTDA.
Tel. +55.19.8183.3444 – Email roberto.pagano@romaconsulting.biz

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