Burning rubber. (Brazil).

The Brazilian vehicle market has been grinding gears in recent years trying to find a way back to growth, but woe to the automaker that doesn't continue to launch new models in this market. Fiat, for example, is finding out the hard way the cost of not having a replacement for its highly successful Uno. The Italian automaker's Palio has been unable to take up the slack, with the automaker's market share expected to drop to a high of 16% in 2003 from 26% in 2001.

Volkswagen, the market leader, has launched the Polo in 2002 to complement its highly successful Gol-the two cars will sell a combined 400,000 units in 2003 representing more than a quarter of all passengers cars sold in Brazil, according to research firm DRI-WEFA.

General Motors has launched a new version of its Corsa to keep pace. GM is also attacking the most economical portion of the market, the so-called A segment, with its Celta. "The Celta is unique because it was the first vehicle to be sold in high volumes through the Internet," says Maru Santiago, director of Latin America for General Motors. Some 90,000 Celtas were sold last year, 70% via the Internet.

However, this year the Celta faces increasing competition from Ford's new offering, the so-called Amazon Project. The Fiesta-like car's sales are expected to go from 22,000 in 2002 to 35,000 in 2003, according to DRI.WEFA. During the next five years, Peugeot, Fiat and Mitsubishi are all expected to introduce vehicles in this segment, which will grow at an average annual rate of 15% through 2007.

As they have done around the globe, automakers are using zero-interest financing to keep cars moving. In the Brazilian market, however, the scheme is available only with a hefty down payment of 40% to 60% of the value of the car. Nonetheless, if the plan proves successful, producers may extend the, offer beyond the initial trial period, scheduled to end in December 2002.

Passenger cars represent more than 80% of the Brazilian market, but light commercial vehicles have also performed poorly in recent years. The market push from launching vehicles, however, holds here, too. Ford's Project Amazon CDV, a so-called car-derived. van launched in 2002, is expected to help power a 45% increase in sales this year, while Volkswagen's aging, Saveiro pickup and Kombi mini-van are losing traction. VW sales in this segment will fall 40% in 2002, according DRI.WEFA.

With the new models and financing schemes plus the end of electoral uncertainty after the October elections, the Brazilian market: is expected to rebound in a big way. DRI.WEFA forecasts that total vehicles sales will jump from almost 1.6 million units in 2002 to just over 2 million in 2004, equaling the sales record achieved in 1997.

[GRAPH OMITTED]

Top Sellers


Gol (VW)      18%
Palio (Fiat)  12%
Corsa (GM)    11%
Celta (GM)     7%
Uno (Fiat)     5%
Other         47%

Note: Table made from pie chart.