The Brazilian industry business environment evolution challenges and opportunities. Event presentation

Transcription

1 The Brazilian industry business environment evolution challenges and opportunities Event presentation São Paulo, May 22 nd 2017

2 The Brazilian political and economic landscape is still fragile with lots of uncertainties: Mix of good and not so good news Political-economical landscape Political landscape Public finances Employment levels Inflation outlook Interest rates FX and trade balance Investments Source: Roland Berger > Brazil's new, reformist, government led by Michel Temer faces low approval, political scandals and general pessimism mandate is at risk via the Superior Electoral Court > After years of solid primary surpluses, there is no sign of a healthy public finance situation until 2020; Pension reform is critical for stabilization > Despite the economic recovery foreseen, it is unlikely to return to its recent historic unemployment lows (6.8% in 2014), staying in the double-digits (between 11-13%) in the future > Consumer prices inflation has reached historic lows not seen for over a decade and consistently below the 4,5% target, putting further pressure on domestic consumption > For 2018 a decrease in interest rates by ~30% is expected (down to ~8p.p.) as direct consequence of a more (financially) disciplined government trusted by the financial markets > The BRL has stabilized in 2016, gaining 20% on the USD before dropping off after the US elections Positive expectation on trade balance is key to support deficit reduction > Investments have decreased significantly and the FDI is expected to return to growth still in 2017 as global investors regain trust in Brazil The Political and economical landscape remains very sensitive: Continuous news from Lava-Jato and reforms move slowly? Forecasting is challenging 2

3 The industry is close to the end of the sharp downturn: Jan-Apr shows improvement and Anfavea projects a mild growth for 2017 Brazilian automotive industry evolution Passenger and Light commercial vehicles Passenger cars and light commercials [m units] Industry capacity: ~5.1 m units Commercial vehicles ['000 units] Industry capacity: ~220 thous. units 3,4 3,2 3,3 3,5 3,0 2,3 2,1 2, ,8 27 3,6 3,6 3,3 3,4 3, , ,0 2,1 1, , ) ) Production 1) Anfavea projections Source: Anfavea; Roland Berger Historic figures Jan-Apr/2017 3

4 e 2018e f 2018f The recovery should be slow as the "natural" Brazilian demand is lower than recent previous "inflated growth" years Evolution of the Automotive industry employment levels Passenger cars and light commercials [m units] Commercial vehicles [Trucks, '000 units] 10-year average Natural demand" Growth analog GDP 3,6 3,6 3,3 3,4 3,3 2,8 2,9 2,7 2,5 2,2 2,3 2,0 2,0 1,5 1,6 1,5 1, Source: Anfavea; Roland Berger 4

5 A research conducted by Roland Berger and Automotive Business with their readers corroborates with this view Evolution of the Automotive industry employment levels Passenger cars and light commercials [m units] What is your expectation for the year 2017 compared to 2016? 65% Commercial vehicles [Trucks, '000 units] What is your expectation for the year 2017 compared to 2016? 40% 45% 28% 1% 4% 1% 1% 7% 7% Strong retraction (- 10% or more) Mild retraction (from -5% to - 10%) Stagnation (from -5% to 5%) Mild growth (from 5% to 10%) Strong growth (10% or more) Strong retraction (- 10% or more) Mild retraction (from -5% to - 10%) Stagnation (from -5% to 5%) Mild growth (from 5% to 10%) Strong growth (10% or more) 64% believe that the market will return to 3,6 million units only after % believe that the market will return to 200 thous. units only after Source: Pesquisa 2017 Roland Berger Automotive Business 5

6 The Brazilian automotive industry has gone through a deep restructuring process, yet productivity is still below recent past Evolution of the Automotive industry employment levels and productivity Vehicles produced / employee Revenues / employee [USD '000] , , , , , , , , , ,7 n.a. 2017f 23,4 n.a!! Highlights > The industry revenue levels is at its lowest point: In 2015, it closed at ~46 Bn USD, which is half of the industry's revenues in 2011 > High number of OEMs mfg. plants and vehicle models, with relatively low production volumes plays as well against productivity > In countries such as Germany, US and Mexico, average units produced per year per vehicle model is above 80 thous. units, while in Brazil this is below 30 thous. units > Mexico produced 3.6 m vehicles per year while employing ~80 thous. people (2015), rendering ~45 vehicles / employee Source: Anfavea; Roland Berger Ø 26 6

7 The next step is to review our companies' business models taking into consideration the opportunities and threats ahead Automotive companies change path Phase 1 Short-term cost reduction 2 Lowering break-even point 3 Redefinition of business model Time-frame Should be completed Should be completed 2017 onwards Market environment > Dramatic volume drop > Further significant volume drop > Slow volume recovery > But: more structural changes than ever to be mastered Management priorities > Reduce personnel cost short-term (short-term work, reduction of temps, ) > Renegotiate purchasing and client contracts > Secure cash availability > Reduce overhead burden > Reduce plant level fixed cost > Reduce R&D cost > Ensure refinancing > Adapt footprint and structural setup > Definition of global vs. regional presence > Adjust product portfolio and regional/customer portfolio > Allocate R&D resources and CAPEX strategically > Get ready for Industrie 4.0 Source: Roland Berger 7

8 The future of the automotive industry (globally) differs much from its past Key trends and drivers in the years ahead (additional to domestic slow market recovery) Connectivity ++ Shared Mobility Autonomous Driving o > Most affordable, incremental technology / trend > In line with the regional consumer appetite for increased communication and services and ease with data sharing > Successful market entry of the "ride hailing" model Uber > Car sharing models and P2P models still underdeveloped > Driver assistance available only in premium vehicles > Technology costs still high for the region > Region lags regulatory environment Disruptive Trends and their estimated relevance in South America > Emissions regulation does not require adoption of evs in the short-term > High vehicle acquisition costs, lack of infra-, long driving distances and low consumer interest for xevs detracts early adoption in the region > Client disillusion with dealer sales services and consumer attraction towards innovative sales forms create the space for retail innovation > Regulatory environment (Lei Ferrari) hinders development of aggressive direct sales Electrification High relevance + Significant relevance Limited relevance Source: Roland Berger o + Digital Retail 8

9 HR will be key in this journey as companies need new competencies A global RB research reveal new priorities for HR managers Key topics for HR in the years ahead RB study Highlights > The priorities in HR management are changing with current times > A study conducted by RB with various executives of >300 companies reveal the relevance of Talent management, Leadership, Change Management and Culture & Engagement as well as of Digitization and People analytics Source: Roland Berger 9

10 Cloud-based tools and Mobile HR apps are the most recent trend, helping with lower costs and employee-centric Key topics for HR in the years ahead Example: Digitization Highlights > There's a variety of cloud-based systems and tools and Mobile HR apps being launched in the market every year > Various are employee-centric and low cost, which can help HR raise the satisfaction at work and reduce costs, while guaranteeing that the companies are connected to the new generation of professional Source: Roland Berger 10

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