Historically, the automotive sector has a relatively large weight in the brazilian industrial sector, by considering the entire productive chain. This naturally translates politically into a large lobby within the government. In this sense, the automotive sector has been benefitting from constant tax incentives (such as a temporary tax cuts) that provides lower prices and stimulate the purchase of vehicles.

Furthermore, the purchase of vehicles has been driven by the incorporation of about 30 million people to the so-called new middle class over the last ten years, mainly due to the increase of the average real wage in the economy. This segment of the population had easy access to credit (for example, in 2010, when there was lengthening of payment terms and lower interest rates) which increased the number of people who have bought their first vehicle. Before that, we have to highlight the stabilization of the Brazilian economy under the success of the so-called ´Plano Real´ (implemented in 1994) providing solid roots for the real increase of wages.

Increased vehicle fleet in Brazil is clear when analyzing the evolution of the number of inhabitants per vehicle in the chart below. That is, the lower the ratio of inhabitants per vehicle, the greater the number of vehicles per capita.

 

However, we are still far from developed countries such as: United States, Germany and Japan. In these countries, the ratio of inhabitants per vehicle is close to 1. That's almost 1 vehicle per inhabitant. And Brazil is still short of the ratio of inhabitants per vehicle in emerging countries like Mexico (3.5) and Argentina (4.0). Obviously beyond the issue of lower real income in Brazil (among other factors, due to the relative low-skilled Brazilian workers), there is the issue of the price of the car in Brazil that is much more expensive than in other countries mainly due to the high tax burden.

Furthermore, it is interesting to note that there is a large discrepancy between inhabitants per vehicle among Brazilian regions. In the Northern and Northeast region, where per capita income is relatively lower, the ratio of inhabitants per vehicle is relatively higher (ie, less vehicles per capita) than in the richest regions of Brazil and South, Southeast and Midwest. In the latter, we highlight the Federal District (where the capital of Brazil is located). The largest number of vehicles per capita has to do with the high real wages of federal civil servants.