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A tank half-full: Brazil pulls ahead in the worldwide race for alternative-fuel automobiles.

Brazil now leads the planet in the race to end dependency on petroleum. Cars that run on either gasoline or alcohol or both in a mixture--known locally as a "flex" car--have captured the entire world's attention. There are 1.3 million flex vehicles on the road in Brazil. Although this amount represents less than 7% of all Brazilian cars in use, an estimated 20 million cars total, experts calculate that in five years flex-fuel cars will hit 5 million, a huge leg-up on developed economies.

Volkswagen launched the flex car in March 2003 to initial consumer mistrust. Inefficient, alcohol-run models sold in years past had traumatized Brazilian drivers. The flex model nevertheless soon conquered a wide public. In less than two years, the number of flex cars being manufactured here has exceeded that of gasoline models. By December 2005, 73% of new cars were running on alcohol as often as on gasoline. This year's forecast raises that figure to 95%. Rogelio Golfarb, president of Brazil's national association of auto manufacturers, Anfavea, says that the technology drove sales of 1.7 million new vehicles in 2005. "The flex motor changed the Brazilian automotive market," he says. "Brazil is undergoing a development stage many countries would like to be experiencing."

The flex motor itself is simple. Software onboard identifies and controls the mixture of alcohol and gasoline in the tank using information from the fuel-injection system. But the secret of the Brazilian flex car's commercial success is not so much due to the technology, many here say.

"The flex advantage is that people don't have to be held hostage with one kind of fuel, as happened with the alcohol car," says taxi driver Sergio Amaral Costa, who two years ago traded a gasoline-only Parati van made by Volkswagen for a flex-fuel General Motors minivan known as the Meriva Flex. "I alternate or I mix the two fuels, depending on the price at that moment and always save some money."

For manufacturers, the popularity of the flexmobiles has been surprising. Last year, Anfavea estimated a 5% growth of all car sales; instead, it hit almost 11%, four times the rate of Brazil's economic growth. "The flex stimulated sales and at least half of the sector's growth can be attributed to it," says Sergio Pray, president of Fenabrave, the federation of automobile dealers, representing 5,000 dealers around the country. "The flex technology has changed the way people make a purchase decision".

Volkswagen pioneered the flex motor with its bestseller, the Gol. The company ended 2005 with 93% of its vehicles made in Brazil sold domestically--378,000 units, including 10 models of cars and light trucks equipped with flex-fuel technology. "In the beginning, we continued manufacturing the same gasoline model, but as the demand plunged to zero we stopped selling that line," says Junia Nogueira de Sa, director of corporate affairs at Volkswagen do Brazil. Volkswagen had lost its leadership position in Brazil for a few years; the flex phenomenon meant it could resume its competitive position in the consumers' minds. "During five months, Volkswagen was the only Brazilian car maker to offer flex cars and was able to gain important points in market share," he says. Now it has set goals to become the first manufacturer to make its domestic market output 100% flex-fuel cars.

Fiat, however, expects to crash Volkswagen's party. Leading the market with 25%--1.5% ahead of the runner-up--the Italian car maker got into the market late but recovered lost ground in 2005, closing the year with 95% of its 400,000 vehicles sold domestically equipped with flex technology. In 2004, Fiat was first to launch a cheaper, broader selling car with its 1.0 Flex motor. "In 2005, we earned the place of being the manufacturer with the largest amount of flex-fueled models on the Brazilian market, and we consolidated our leadership" says Lelio Ramos, commercial director of Fiat do Brazil. "The flex technology probably will not reach 100% of the domestic market, but it is here to stay, and its utilization tends to be widely publicized."

The Brazilian market is so thirsty for flex-fueled vehicles that even smaller manufacturers, such as French car companies Renault and Peugeot--which have relatively tiny market shares of 3.3% and 2.9%, respectively--already have begun adopting the technology, developed mainly by Bosch and Magneti Marelli in Brazil. To fall behind in that race can be very costly, as General Motors has shown. GM lost ground in the domestic market--falling to third in market share--due to the delay in launching what eventually became the most popular flex-version car sold in the country, the Celta 1.0. Even so, GM closed 2005 producing more from 70% of its 11 models with a flex-fuel motor.

Ford, the fourth-largest Brazilian manufacturer--all together, Fiat, Volkswagen, GM and Ford manufacture 80% of the domestically made vehicles--also fell behind. It launched its first flex car in 2004, but today the manufacturer's bestselling models--the Echo Sport, Fiesta Sedan and Fiesta Hatch--run on flex-fuel motors. Ford produced 210,000 vehicles last year, half of them flex cars. According to Jorge Chear Neto, national sales manager of Ford do Brazil, the manufacturer did not advance more quickly with the flex because several gasoline models still sell well. "But, the flex-fuel trend is strong and we certainly will follow it," Chear says. "We see it as is a road with no return."


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Title Annotation:AUTOS; Volkswagen AG remains the market leader
Author:Pfeifer, Margarida O.
Publication:Latin Trade
Geographic Code:4EUGE
Date:May 1, 2006
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