Why car 0 km became a rich man’s product and must remain too expensive

Zero-kilometer car was never accessible to the masses in Brazil, but it became an even more restricted product after the pandemic.

Soaring prices, more expensive credit and a significant drop in the purchasing power of most of the population have driven the middle class away from the dream of having a new vehicle in the garage – Fiat Mobi and Renault Kwid, the most affordable options, are already approaching. of R$ 65 thousand in the respective entry versions.

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According to Mobiauto, since March 2020, when contamination by the coronavirus was already spreading around the world, zero cars have become 40% more expensive in the country. At the same time, the IBGE (Brazilian Institute of Geography and Statistics) reports that only last year 7.2 million Brazilians began to live in poverty.

experts consulted by UOL Cars detail the reasons why automobiles have become “products of the rich”, even the simplest models, and emphasize that this scenario will not change here in Brazil anytime soon.

According to Flavio Padovan, partner at the consultancy MRD Consulting, factors such as a microchip shortage, which limits vehicle production and forces prices up, will still persist. The same goes for the rise in interest rates, which limits or even makes possible vehicle financing unfeasible.

“This problem with chips has already improved a little, but it will continue at least until 2023. Russia’s war against Ukraine, major suppliers of inputs for electronic products, has only worsened the situation”, explains Padovan, a former executive at automakers such as Ford, Volkswagen and Jaguar Land Rover.

He adds that many automakers have prioritized more expensive models when installing the chips available in factories, prioritizing vehicles that provide greater profit margins.

It is not by chance that even entry-level models have retired the simpler and more affordable versions, says the expert – this contributes to the escalation in prices.

“In the absence of new cars in stock, even used ones became more expensive and this ten boosted the demand for vehicle repair services. Many stopped changing cars to fix or renovate the car they already had”, he analyzes.

‘Popular car hurts’

Mobi Easy, the simplest version of Fiat’s subcompact, was discontinued by the automaker in early 2022

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According to consultants in the automotive sector, vehicle manufacturers have naturally adjusted their range to the reality of higher prices, failing to offer what was once known as the “popular car”.

“There’s no way. The combination of high demand with little supply traditionally causes the industry to eliminate vehicles that provide low margins and focus on cars with higher added value, much more profitable”, ponders Padovan.

He points out that the basic compacts “generally” cause losses to automakers and their main function is to keep the factories operating, so as not to aggravate the hole in the accounts – idle assembly lines, he explains, are another source of losses.

Better cars, higher prices

Ricardo Bacellar, founding partner of Bacellar Advisory Boards and advisor to SAE Brasil, says that calling a car popular in Brazil is almost “offensive”, since the average income has not kept up with the rise in prices. The former KPMG Brasil executive adds that, even after the effects of the pandemic on the market, the cost of vehicle production will continue to rise.

“Cars have incorporated an increasing volume of regulatory requirements related to emissions, energy efficiency and safety items. This requires increasing investments in technology and means that the time of the ‘naked’, ‘bull’s foot’ car is in the past. “, ponders the consultant.

For Bacellar, entry-level compacts still dominate the list of best sellers in the country, proving their relevance in the market and their survival for many more years. At the same time, these models are already and will be even more expensive and equipped.

“The Chevrolet Onix is ​​proof of that. After not being produced for five months last year, it showed a spectacular recovery in the second half of the year, while the Joy version, simpler and based on the older generation, was discontinued earlier this year due to low sales, associated with the high investments needed to fit them into the new Proconve L7 emissions legislation, which came into effect in January”, he says.

‘Naked vehicle no longer makes sense’

Renault Sandero S Edition - Disclosure - Disclosure

Sandero (photo) and Logan are unlikely to win a new generation in Brazil; Renault prefers to focus on more profitable SUVs

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Cassio Pagliarini, from Bright Consulting, agrees with his colleague when he says that it no longer makes sense to offer a vehicle without basic comfort and technology items, precisely due to the higher cost of manufacturing it.

“To sell a basic car, it would have to be much cheaper than it is today. With the rise in prices, customers have also become more demanding. Today, they do not give up equipment such as power steering, air conditioning, locks and electric windows and some level of connectivity. As the quality of the cars has gone up a lot, due to the addition of mandatory technological items, the difference in cost between a ‘naked’ example and another a little more equipped was small”.

With stints at companies such as Hyundai and Ford, the consultant points out that this is the main reason for the current success of SUVs.

“Since people are going to spend a considerable amount, they prefer vehicles that bring a perception of greater added value. SUVs offer a high driving position, greater ground clearance and other qualities that make consumers willing to pay more for that kind of car”.

Not by chance, at the end of 2021, Renault announced that it will focus its investments in Brazil to develop and launch SUVs, signaling that Sandero and Logan should not gain a new generation in the country – the compacts were recently renovated in Europe, where they are sold by Romanian subsidiary Dacia.

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