The government as an inducer of the automotive industry: propositions for Brazilian automotive sector

Ferreira Filho, Valter Silva; Delamaro, Maurício César; Marins, Fernando Augusto Silva; Rocha, Henrique Martins

doi:10.1590/0103-6513.20220055

Valter Silva Ferreira Filho^* * valter.ferreira@unesp.br

Universidade Estadual Paulista “Júlio de Mesquita Filho”, Faculdade de Engenharia de Guaratinguetá, Departamento de Produção, Guaratinguetá, SP, Brasil

https://orcid.org/0000-0002-2852-4530

Maurício César Delamaro ^** ** mauricio.delamaro@unesp.br

Universidade Estadual Paulista “Júlio de Mesquita Filho”, Faculdade de Engenharia de Guaratinguetá, Departamento de Produção, Guaratinguetá, SP, Brasil

https://orcid.org/0000-0002-8453-7299

Fernando Augusto Silva Marins ^*** *** fernando.marins@unesp.br

Universidade Estadual Paulista “Júlio de Mesquita Filho”, Faculdade de Engenharia de Guaratinguetá, Departamento de Produção, Guaratinguetá, SP, Brasil

https://orcid.org/0000-0001-6510-9187

Henrique Martins Rocha ^**** **** prof.henrique_rocha@yahoo.com.br

Universidade do Estado do Rio de Janeiro, Faculdade de Tecnologia, Departamento de Engenharia de Produção, Resende, RJ, Brasil

https://orcid.org/0000-0002-3029-7250

* valter.ferreira@unesp.br

** mauricio.delamaro@unesp.br

*** fernando.marins@unesp.br

****
prof.henrique_rocha@yahoo.com.br

Calendar Year	PINTEC Spontaneous rate	Inovar-Auto Compulsory rate
Calendar Year	% of Gross Operating Revenue
2011	2.8%	-
2012/2013	2.1%	0.15%
2014	2.1%	0.30%
2015/2016	2.1%	0.50%
2017	2.3%	0.50%

RESEARCH PHASES
Phase	Description
1.	Documentary survey: Automotive policies related in Brazil and worldwide
2.	Based on Phase 1, a questionnaire was prepared containing 1 closed and 3 open questions, applied to 30 high-level executives from 5 automotive companies from the Sul-Fluminense Automotive Hub, supported by Federation of Industries of the State of Rio de Janeiro (Q4/2018).
3.	Based on Phase 2, a new questionnaire was created, with 14 closed questions and applied to the same audience plus National Association of Automotive Vehicle Manufacturers (Q1/2019).
4.	Based on Phase 3, a set of 7 propositions was elaborated that would guide actions aimed at building a sectoral policy. From these propositions, a new questionnaire composed of 32 closed questions was derived and applied to 550 professionals linked to the automotive ecosystem (C-Level/Senior executives from automakers, autoparts, consultants, researchers, service providers etc), from 96 companies in Brazilian territory (Sep-Oct/2021).
5.	Based on Phase 4, the 7 propositions was revised to 6 and its expected results. This new set of propositions gave rise to a fourth questionnaire composed by 6 closed questions and submitted to the same population of 550 professionals (Dec/2021-Jan/2022).

Parameter	What measures or determines	Formula
1. Average	The ratio of the sum of all elements in a data set.	$\bar{x} = \frac{1}{n} \sum_{i - 1}^{n} x_{i}$
2. Median	The value that occupies the central position of the series of observations of a variable, in a roll, dividing the set in two equal parts.	$M e d = \frac{x_{n + 1}}{2}$
3. Variance	Shows the variation around the measure	$S^{2} = \frac{\sum (x - \bar{x})}{n - 1}$
4. Sample standard deviation	Shows the distance of each value in the data set in relation to the central mean value. The smaller, the closer the value is to the average.	$S = \sqrt{\sum_{i = 1}^{N} \frac{{(x_{1} + \bar{x})}^{2}}{n - 1}}$
5. Concordance Validation Index	The degree of consensus measured about a proposition using n-point adapted Likert scale. Notes: (g = grades assigned) (r = maximum possible score). Expected value range according to the consulted literature ≥ 0,7	$C V I (h) = \frac{\sum g}{\sum r}$
6. Coefficient of Variation	The variation between data set measures on scales. Measures the variation relative to the average. Expected value range according to the consulted literature ≤ 30%	$C V = \frac{S}{\bar{x}} \times 100$
7. Interquartile Range	The degree of a spread of data around the centrality measure. A measure of data dispersion around the population average. Expected value range according to the consulted literature ≤ 40%	$R = \frac{(Q_{3} - Q_{1})}{Q_{1}}$

RESEARCH PROCEDURES AND TOOLS
Specific Goals	Acquisition Tools	Analysis Tools	Analysis Technique
Identify sectoral policies for the automotive industry.	Bibliographic/documentary research	Document analysis	Systematic Literature Review
Sul Fluminense IAB Executives Inovar-Auto perceptions.	Survey	Parametric/non-parametric statistics SPSS software	Content analysis Method
Confirm Sul Fluminense IAB Executives Inovar-Auto perceptions	Delphi Survey Round		Delphi Method
Create proposal to support a sectoral policy for automotive industry.
Validate proposed action to support a sectoral policy for automotive industry.

PERCEPTION OF THE LOCAL AUTOMOTIVE INDUSTRIAL ENVIRONMENT ON INOVAR-AUTO
Likert Scale Concordance Grade
1. The current business model of the Automobile Industry, based on the production and sale of vehicles, is still adequate to the current behavior and will be so for the next decade.
2. The creation of upper limits for the age of the circulating fleet would stimulate the demand for new vehicles.
3. Changing the IPVA collection to a model based on increasing values indexed to the age of the vehicle and emissions (older and more polluting vehicles pay more) would encourage a reduction in the age of the fleet
4. The unification of federal taxes on the sale of vehicles and parts (PIS/COFINS and IPI) into a single tax with a single rate and on the added value would bring benefits to the production chain.
5. The Brazilian Automotive Industry (IAB) supply chain is internationally competitive.
6. The creation and maintenance of R&D incentives contributes to the development of the IAB
7. The availability of credit for the purchase of new vehicles is a more important sales constraint than the price of the vehicle itself.
8. At least 70% of Tier1 suppliers are located within 200km of the Automaker.
9. Only through legal requirements would the quality level and the technological level be equivalent to those practiced in developed markets (USA, EU and Japan).
10. Macroeconomic factors such as interest rates and exchange rate have a great influence on price formulation
11. Alignment with European and North American safety and emissions standards would bring positive scale effects and create export opportunities for developed markets
12. The high automation rate of the automakers' production process is a reality and contributes to productivity at internationally competitive levels
13. The automation rate of supplier operations is high and offers a satisfactory scale effect
14. The level of quality and technology of national products follow European, North American and Japanese standards

COMPILATION OF RESEARCH RESULTS BY THE DELPHI METHOD
SPECIALISTS		Sul Fluminense Automotive hub Automakers Executives perception regarding Inovar-Auto Policy
SPECIALISTS			1	2	3	4	5	6	7	8	9	10	11	12	13	14
GRADES ASSIGNED	Car Automaker 1	1	4	5	5	4	2	5	4	2	1	4	4	5	1	4
		2	5	4	5	4	3	4	5	2	1	5	5	4	1	5
		3	5	5	4	5	2	5	5	2	1	5	5	4	1	5
		4	5	5	4	5	2	4	5	2	2	5	5	4	1	5
		5	4	4	4	4	1	4	5	2	2	4	5	4	1	5
	Car Automaker 2	6	4	5	4	5	2	4	5	2	1	5	5	4	1	5
		7	4	4	5	5	1	5	4	2	2	4	5	4	1	5
		8	4	4	4	4	2	4	5	1	1	5	5	4	2	4
		9	4	5	5	4	1	4	4	1	1	4	5	4	2	5
		10	5	5	5	5	1	5	4	1	1	4	5	4	1	5
	Car Automaker 3	11	5	5	4	5	2	5	5	1	1	4	5	5	2	5
		12	5	5	4	4	2	4	4	2	1	4	5	5	2	5
		13	4	5	5	4	2	4	5	2	1	4	5	5	2	5
		14	5	4	5	4	2	4	4	2	2	4	5	4	1	5
		15	5	4	5	5	2	4	5	2	2	5	5	4	1	5
	Commercial Vehicle Automaker 1	16	5	4	5	4	2	5	5	1	1	5	5	4	1	5
		17	5	5	5	5	2	5	5	1	1	5	5	5	1	5
		18	5	5	4	5	2	5	4	1	1	5	5	5	1	5
		19	4	5	5	4	1	4	4	1	1	4	5	4	1	5
		20	4	5	4	5	1	4	4	2	1	5	4	4	1	5
	Commercial Vehicle Automaker 2	21	4	4	5	5	2	4	4	1	1	4	5	4	1	5
		22	4	5	5	4	2	4	5	1	1	4	5	4	1	4
		23	4	5	5	5	2	5	5	2	1	5	5	4	2	5
		24	5	4	4	5	2	4	5	1	2	5	5	5	2	4
		25	4	5	4	4	1	4	5	1	1	4	5	4	1	5
	Heavy Machine Automaker	26	4	5	4	5	1	4	5	1	2	4	5	5	2	4
		27	4	5	4	4	1	4	4	1	2	4	4	5	2	4
		28	5	5	4	5	1	5	4	1	2	4	4	5	2	4
		29	4	4	4	5	1	5	5	1	2	4	4	5	1	4
		30	4	5	5	5	1	5	4	1	1	4	4	5	1	5
STATISTICAL DATA PROCESSING		CVI	0.88	0.93	0.9	0.91	0.32	0.88	0.91	0.28	0.26	0.88	0.96	0.88	0.26	0.94
		Var	0.25	0.23	0.26	0.25	0.31	0.25	0.25	0.25	0.23	0.25	0.16	0.25	0.23	0.20
		Mdn	4	5	4.5	5	2	4	5	1	1	4	5	4	1	5
		SD	0.50	0.48	0.51	0.50	0.56	0.49	0.50	0.50	0.48	0.49	0.41	0.49	0.48	0.45
		CV	0.11	0.10	0.11	0.11	0.34	0.11	0.11	0.35	0.36	0.11	0.08	0.11	0.36	0.09
		Q1	4,0	4,0	4.25	4.25	1.75	4.25	4.75	1.25	1.25	4.75	5,0	4,0	1.75	4.25
		Q3	4.25	4.75	4.75	5	2	4.75	5	1.75	1.25	5	5	4.25	2	4.75
		IR	0.063	0.19	0.12	0.18	0.14	0.12	0.05	0.4	0	0.05	0	0.06	0.14	0.12

KEY FACTORS TO CREATE A SUSTAINED INDUSTRIAL POLICY
Likert Scale Concordance Grade

Environment: In this section, statements will be made about environmental impacts related to the age of the motor vehicle fleet, technological aspects and their impacts, energy efficiency and regulatory aspects.
1. The insertion of more efficient and less polluting vehicle models (cars, light commercial vehicles, trucks and buses) in the Brazilian market will only occur through the regulatory obligation through the adoption of strict standards of emissions and consumption.
2. The creation of maximum limits for the age of the current fleet would stimulate the demand for new vehicles.
3. The adoption, by Brazil, of emission and consumption standards following the same criteria/parameters adopted by the USA, European Union and Japan would be a facilitator for Brazilian exports.
4. The insertion of more efficient and less polluting vehicle models (cars, light commercial vehicles, trucks and buses) in the Brazilian market without the respective removal of more polluting vehicles does not actually bring environmental gains.
KEY FACTORS TO CREATE A SUSTAINED INDUSTRIAL POLICY
Likert Scale Concordance Grade

Vehicle Safety: In this section, statements will be made about the impacts of replacing the fleet of motor vehicles on vehicle safety.
1. The insertion of safer vehicle models (cars, light commercial vehicles, trucks and buses) with technologies such as stability control (ESC), advanced driver assistance systems (ADAS) and other vehicle safety assistive technologies, will only occur through regulatory obligation through the adoption of strict safety standards
2. The adoption by Brazil of vehicle safety standards following the same criteria/parameters adopted by the USA, European Union and Japan would be a facilitator for Brazilian exports.
3. The insertion of safer vehicle models (cars, light commercial vehicles, trucks and buses) in the Brazilian market without the respective removal of less safe vehicles does not actually increase road safety.
4. The adoption by Brazil of vehicular safety standards following the same criteria/parameters adopted by the USA, European Union and Japan would bring gains of scale and consequent reduction in the costs of vehicular systems.
Tax: In this section, statements will be made about the tax and fiscal impacts related to the replacement of the fleet of motor vehicles and related topics (technological level and regulation).
1. Considering that the major suppliers of auto parts and systemists installed in Brazil are multinationals with global supply, that the production processes implemented by them in Brazil have the same technological level as those applied in other major markets, the elimination of the import tax on auto parts would bring greater competitiveness for the automotive sector..
2. The reduction in the rates of direct taxes on the sale of vehicles would have the net effect of reducing the prices effectively practiced by the automakers in the market and, as a consequence, more sales.
3. Changing the IPVA collection to a model based on increasing values indexed to the age of the vehicle and emissions (older and more polluting vehicles pay more) would stimulate the reduction of the age of the fleet.
4. The unification of federal taxes on the sale of vehicles and parts (PIS/COFINS and IPI) into a single tax with a single rate and on the added value would bring benefits to the production chain.
Credit: In this section, statements will be made about the impact of credit on the sale of vehicles and as a tool to stimulate the automotive sector.
1. The credit for the purchase of new commercial vehicles, especially trucks, is a sales limiter equally applicable to fleet owners and autonomous truck drivers.
2. New business models, such as car servitization (car as a service) are a viable alternative to the scarcity of credit for the purchase of new cars.
3. The use of subsidized credit programs, along the same lines as programs for housing, would be an alternative for stimulating and reducing the cost of financing the acquisition of new vehicles.
4. The simple generalized offer of subsidized credit is not a viable instrument in the long term.
Exchange: In this section, statements will be made about the impacts of the exchange rate on the automotive sector.
1. The devaluation of the Real against the US Dollar and the EURO created an opportunity for the export of automotive goods and services, making Brazil more competitive in the global automotive sector.
2. The depreciated Real boosted foreign investment in the Brazilian automotive sector, as it became cheaper to develop and manufacture in Brazil.
3. The depreciated Real puts pressure on the value of commodities, especially metallic commodities, which brings great volatility to the Brazilian automotive market.
4. The devaluation of the Real against the US Dollar and the EURO created a natural barrier to imports, which strengthens the local ecosystem of the automotive sector.
KEY FACTORS TO CREATE A SUSTAINED INDUSTRIAL POLICY
Likert Scale Concordance Grade

Supply Chain: In this section, statements will be made about the impacts of replacing the fleet of motor vehicles in the supply chain of the automotive sector.
1. Considering that the major suppliers of auto parts and systemists installed in Brazil are multinationals with global supply, it can be assumed that the production processes implemented by them in Brazil have the same technological level as those applied in other major markets, which makes our supply chain Highly competitive local supplies.
2. The creation of maximum limits for the age of the current fleet would stimulate the demand for new vehicles and consequently the demand for parts and components.
3. The lack of predictability of production/sales volumes directly affects supply chain costs.
4. The technological level of local suppliers constitutes an important gap in the supply chain of the Brazilian automotive sector.
Industrial Processes: In this section, statements will be made about the technological impacts on industrial processes in the automotive sector.
1. The industrial processes of companies installed in Brazil (assemblers, manufacturers and auto parts) are highly technological and competitive.
2. The Brazilian automotive industry makes extensive use of tools and elements of the so-called “Industry 4.0” as a way to gain productivity in its manufacturing processes.
3. The industrial processes of multinational companies installed in Brazil (assemblers, manufacturers and auto parts) are at the same technological level as the main global markets.
4. The mandatory local execution of a minimum number of manufacturing activities for auto parts suppliers would strengthen the local ecosystem with the creation of critical mass, which would make the supply chain more competitive.
Research, Development and Innovation (RD&I) Ecosystem: In this section, statements about the R, D&I ecosystem of the automotive sector will be made.
1. The automakers, auto parts manufacturers and systemists installed in Brazil have a robust research, development and innovation infrastructure locally, capable of locally developing, testing and validating state-of-the-art technologies.
2. In Brazil, there is a culture of bringing the productive ecosystem closer to universities and research centers
3. The creation of R, D&I infrastructure shared between universities, research centers and industry would enhance the technological densification of the automotive industry and create new opportunities for the sector.
4. The creation of a program and a specific fund for the automotive sector, with a focus on nascent companies, would be an alternative for the development of a genuinely Brazilian automotive industry.

PROPOSITIONS VALIDATION
Proposition	Step	Expected Result
Likert Scale Grade


1.Creation of a scrapping and replacement program for the fleet of motor vehicles divided into three stages.	1.Full scrapping of the fleet over 15 years old. This stage would last up to three years;	1.Withdraw approximately 35 million motor vehicles over 10 years of age from circulation;
	2.Full scrapping of the fleet over 12 years old. This stage would last up to two years;	2.Reduce, according to the estimates by Penna et al. (2013)Penna, P. M. M. A., Nascimento, L. F. C., & Rezende Filho, C. B. (2013). Vehicle air pollution and environmental tax law in Brazil: proposal for tax restructuring for sustainable development. Revista Ambiente & Água, 8, 183-203., vehicle pollutant emissions by 70%;
	3.Full scrapping of the fleet over 10 years old. This stage would last up to three years	3.Create a demand for replacement of the scrapped fleet with a replacement rate for trucks of up to 70% and an overall average of 30% (combining commercial vehicles and automobiles);
		4.With the creation of demand, reduce the idle capacity of the industry and improve the predictability of production volumes;
		5.Stabilization of the production chain saw;
		6.Enable new productive investments through demand creation;
		7.Increase in the recycling value chain.
2.Creation of financing instruments for fleet replacement	1.Granting of scrap bonuses with an amount equal to 80% of direct federal taxes for the purchase of new internal combustion vehicles;	1.Creation of credit conditions that make it possible to replace the fleet and adopt new propulsion technologies;
	2.Granting of scrap bonuses with an amount equal to 100% of direct federal taxes for the purchase of new electric and hybrid vehicles;	2.Offer better credit conditions for self-employed truck drivers;
	3.Creation of a line of credit along the same lines as housing financing programs, but with different terms and conditions for the acquisition of trucks and automobiles. The term should be limited to 48 months for internal combustion automobiles and 120 months for internal combustion trucks;	3.Incremental volume of new vehicle sales;
	4.Special credit line for the purchase of electric and hybrid vehicles;	4.Incremental volume in the collection of direct federal and state taxes.
	5.Minimum term of 10 years.
3.Adoption of technical standards (emissions, vehicle safety, energy efficiency and the like) in line with US and European standards. The adoption of these rules must be mandatory from the institution of the scrapping and replacement of the fleet program.		Elimination of regulatory barriers and development of new markets for vehicles produced in Brazil.
PROPOSITIONS VALIDATION
Proposition	Step	Expected Result
Likert Scale Grade


4.Review of Federal and Regional Taxes	1.Unification and optimization of PIS/CONFINS and IPI with different rates between internal combustion automobiles regardless of power (which would include cars, trucks and SUVs), electric and hybrid cars regardless of power (which would include cars, trucks and SUVs), light commercial vehicles ( which would include SUVs and trucks up to 7 tons total gross weight), trucks (over 7 tons total gross weight), buses (all categories) and electric and hybrid commercial vehicles regardless of power and total gross weight;	1.Reduction of the final value of the acquisition of new vehicles;;
	2.Adoption of a maximum unified federal tax rate of 15%;	2.Stimulate the acquisition of electric and hybrid vehicles
	3.Creation of a contribution to the promotion of the local research, development and innovation ecosystem in the automotive sector with a 2% rate on vehicle sales;	3.Compensate for the reduction in direct tax rates per unit sold (PIS/COFINS, IPI and ICMS) through incremental sales volumes of new vehicles;
	4.Adoption of a final maximum ICMS rate of 15%;	4.With the change in the IPVA, it is expected to encourage the reduction of the age of the circulating fleet in the long term and also to correct a discrepancy that exists today, charge more for new vehicles and encourage the ownership of old vehicles;
	5.Adoption of IPVA based on the calculation of emissions/km traveled+age coefficient+fixed rate per power, where age coefficient is increasing;	5.Increase the competitiveness of the supply chain; saw. Create a source of funds to finance the local automotive research, development and innovation ecosystem.
	6.Extinction of the ex-tariff and the regime for parts not produced locally;
	7.Adopt an import tax rate of 5% for auto parts aimed at industrialization and 15% for auto parts aimed at commercialization;
	8.Create a contribution to the promotion of the local research, development and innovation ecosystem in the automotive sector with a 5% rate on auto parts imports.
5.Creation of a supplier modernization program	1.Reduce and/or eliminate taxation on equipment and technologies applied to industrial processes (including robots, iot, connectivity and digitalization, analytics, etc);	1.Modernization of the supplier pool with world-class technologies;
	2.Intensify cooperation between SENAI, SEBRAE, EMBRAPII and SINDIPEÇAS through a specific line of credit for modernizing the automotive production chain with a focus on small and medium-sized national companies;	2.Increase in the capacity, quality, productivity and competitiveness of national suppliers;
	3.Create a working capital line with a contract with automakers.	3.Insertion of the national industrial park in the global supply chain.
PROPOSITIONS VALIDATION
Proposition	Step	Expected Result
Likert Scale Grade


6.Strengthening of the national Research, Development and Innovation ecosystem	1.Creation of collaborative R, D & I centers in existing automotive hubs in Brazil. These centers would have public-private management involving suppliers, automakers, universities, scientific and technological institutions, in addition to funding agencies;	1.Increased local R, D&I activity;
	2.Establish as a focus of public support the support to national companies, especially non-reimbursable (BNDES, FINEP, SENAI and Research Support Foundations) and subsidized (BNDES and FINEP) funds;	2.Cost reduction of R, D&I activities;
	3.Creation of the Equity Investment Fund (FIP) aimed exclusively at promoting national companies that are emerging in the automotive sector;	3.Capacity building of the local ecosystem for the development of critical technologies;
	4.Eliminate direct taxation on any acquisitions intended for the execution of research and development (inputs, equipment or specialized services).	4.Fostering the development of genuinely Brazilian companies.

[1] * valter.ferreira@unesp.br

Brasil

Brasil

The government as an inducer of the automotive industry: propositions for Brazilian automotive sector

Abstract

Paper aims

Originality

Research method

Main findings

Implications for theory and practice