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With a daily loss of R$1,5 million and facing the high cost of the “Custo Brasil”, Ford closed its operations in the country. In the Irmãos Dias Podcast, expert Boris Feldman reveals the behind-the-scenes story of this decision.
In recent years, the Brazilian automotive market witnessed significant changes, and the closure of Ford's operations in Brazil in 2021 was one of the most impactful events.
After all, what led this automotive giant, with decades of history in the country, to make such a drastic decision? Despite speculation, the reasons go far beyond a simple desire for financial restructuring.
According to experts, Brazil faces a scenario full of economic and structural challenges that were decisive in the automaker closing its doors, impacting thousands of jobs and consumers.
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In the second episode of Dias Brothers Podcast, Journalist and automotive market expert Boris Feldman provided details on the reasons behind this decision and the long-term impacts it is expected to cause.
Ford was accumulating astronomical daily losses in South America, especially in Brazil.
According to Feldman, “the automaker was losing around R$1,5 million per day in the region, mainly due to a combination of poor management, high taxes and high operating costs.” Let’s understand the main points presented by the journalist.
Constant losses and high costs
One of the decisive factors, as Boris Feldman explained, was the daily operating loss faced by Ford in South America.
According to him, operations in the region proved unsustainable.
“Ford was losing R$1,5 million per day in South America,” Feldman emphasized, highlighting that the automaker was unable to manage its business in the region well..
These costs were not only related to market challenges, but also to high taxes in Brazil, which make vehicle production considerably more expensive than in other countries.
As Feldman reported, “when you pay one real for a car, between 40% and 50% of this amount goes directly to the government, in the form of taxes.”
“Custo Brasil” and operational difficulties
Another point raised by Feldman in the podcast was the “Brazil Cost”, a term used to describe the set of factors that make production and the operation of companies in the country more expensive.
These obstacles range from high tax burdens to logistical transportation costs, which affect everything from the import of parts to the distribution of final products..
According to the journalist, “the cost of bringing in imported parts is extremely high, and transportation on Brazilian roads, which are often full of potholes, makes shipping even more expensive.”
This situation causes Brazil to lose competitiveness in the global automotive market, which puts automakers operating in the country at a disadvantage.
“Unlike the United States, where the tax burden on vehicles is around 7% to 8%, in Brazil it can reach 45%,” highlighted Feldman.
These differences directly impact the ability of companies like Ford to maintain a competitive profit margin..
Dependence on the Chinese and Argentine markets
With the closure of Ford factories in Brazil, the automaker became dependent on other countries to supply the national market.
Today, some of the brand's most popular models, such as the Ford Territory and the Ranger, are imported from Argentina and China.
According to Feldman, “The Territory is a beautiful, well-reviewed SUV, but it comes straight from China.”
This dependence increases costs and limits options for Brazilian consumers, who now depend on exchange rates and international logistics to purchase a Ford vehicle..
Furthermore, as pointed out by the journalist, the Chinese market is increasingly present and influential in the Brazilian automotive sector.
China, which is the world's largest manufacturer of electric vehicles, has also been investing in hybrid and electric models.
For Feldman, “Chinese electric cars already dominate countries like Norway, and this reflects the quality and competitiveness of these vehicles”.
This advance creates a scenario in which national production faces additional challenges.
Expansion of electric vehicles and the uncertain future of car manufacturers
The electric vehicle market is growing globally, and China stands out as a pioneer in the sector.
As Feldman explained, even Ford CEO Jim Farley acknowledged the superior quality of Chinese electric vehicles over American ones.
During a visit to China, Farley tested some of these models and declared that “the Chinese are better than ours” in reference to electric vehicles.
This public recognition signals the pressure that traditional automakers, such as Ford and Volkswagen, face to remain competitive.
“Volkswagen, for example, is chasing profits by partnering with Chinese and American companies to advance its electric vehicle technologies,” Feldman said., adding that the automotive sector is experiencing unprecedented change.
General Motors' attempts at innovation in Brazil
General Motors (GM) also faced difficulties in Brazil, especially in the electric vehicle segment.
As detailed by Boris Feldman, GM has not had success with models like the Chevrolet Bolt, but is now betting on new alternatives, such as the Equinox electric SUV.
According to him, GM's initial attempt with electric cars encountered problems, but the company has been adapting its models and investing in technologies that meet consumer expectations.
The role of WEG and the issue of hybrids in Brazil
A possible hope for the sector is the partnership between Volkswagen and WEG, a Brazilian multinational specialized in motors and electrical technologies.
This collaboration aims to create battery technologies and other components for electric vehicles, although Feldman stressed that this is not yet a formal partnership for the production of battery-powered cars.
This collaboration points to the growth of the hybrid market in Brazil, which can attract consumers looking for economical and sustainable alternatives.
For the journalist, one of the best options for Brazilian consumers is the plug-in hybrid car, which allows daily use of electricity and the flexibility of the combustion engine for long journeys.
“With a plug-in hybrid, you can travel up to 150 km in electric mode, which is enough for daily use without relying on gasoline,” explained Feldman.
The future of the automotive market in Brazil
Ford's exit from Brazil highlights the country's structural and economic challenges, which affect the functioning of large automakers and influence competitiveness in the global market.
With the expansion of electric and hybrid cars, Brazil still needs to overcome important barriers, such as charging infrastructure and high operating costs..
Do you think Brazil will be able to adapt to the new demands of the global automotive market? Comment below and share your opinion!
The other automakers went through the same problems and are still there. Management errors were fatal for Ford, as was the case with Ford Trucks, manufacturing failures without recalls, technical issues and political implications were decisive for the closure in Brazil.