Vehicle sales: driven by credit and / or employment? A comparative study between the states of Santa Catarina and São Paulo

By Jucemar Paes Neto (PROBOLSAS extension scholarship holder) 

       Daniel Christian Henrique

Updated 13/01/2021 20:32

The month of October 2020 started a resumption of sales in the automotive sector that was not expected before the current pandemic, marking it as the best month of sales so far for the year. There was a 7.4% increase in vehicle production and an increase in exports of 14.3%. Fenabrave's president, Alarico Assumpção Júnior, indicates that this improvement that occurred this month is related to greater consumer confidence and the increase in the supply of credit granted during the pandemic period. In November, the positive climate remained, with production practically at the same pace and with an even more expressive increase in exports, reaching an increase of 26.2% in relation to October. However, in the comparison of the accumulated in the year, January to October accumulated a reduction of 30.9% in comparison to the same period of 2019 (ANFAVEA, 2020; SMABC, 2020). The year 2020 as a whole materialized a loss of 31.6% despite the recovery that still came about in the month of December, which culminated in the definitive departure of Ford's factories in Brazil. The strong subsidies that the federal government had been offering to the sector since the pre-crisis was not enough to insure the impact of reduced sales in the company (GAZETA DO POVO, 2021).

This whole scenario does not converge to a forecast prospected by Anfavea in a survey conducted in May 2020 through the Webmotors application on Purchase Intention in the COVID-19 Scenario. One of the main results points out that 89% of respondents intended to buy or change cars in 2020, in contrast to the scenario at the end of 2019 in which 66% maintained the same intention. Among the 11% who did not intend to purchase a new car in 2020, 57% claim the financial uncertainty arising from an unemployment situation that prevents them from making the purchase today (ANFAVEA, 2020b). Taking into account the regional situation of Santa Catarina in the pre-pandemic period, vehicle registrations increased by 17.47% compared to November of the same period, plus a 14.52% increase in motorcycle sales. The regional Director of Fenabrave-SC, Julio Schoeder, based this expansion on greater consumer confidence in line with falling interest rates, defaults and unemployment (ENGEPLUS, 2020).

Therefore, an intrinsic relationship can be noted between the independent variables "credit supply" and "employment" for an adequate analysis of which of them can have the greatest impact on the dependent variable "vehicle sales". A long-term growth forecast for these variables, especially in terms of employment, is much more effective in leveraging sales by automakers (as well as sales in other domestic industries) than the usual one-off measure of subsidy supply that they only partially reduce the stratospheric tax burden of the automotive sector, which exceeds 50% of the value of a vehicle and do not stimulate innovation or generate more jobs.

This relationship was investigated, then, for the state of Santa Catarina with a comparison with the state of São Paulo, since it is the state with the most vigorous economy in the country. Due to the fact that the months of February to September 2020 would have been marked by an abnormal period of vehicle sales resulting from the pandemic, with tempers and anxieties cooling down close to October (even with the growth of cases of coronavirus resulting from the second wave) and demand for vehicles to begin their resumption of sales in October (further confirming Anfavea's surveys), it was decided to carry out the analyzes with monthly data from January 2004 to December 2019 in order to the strong impacts of the pandemic period do not generate distortions in analyzes. The variables were collected at the Central Bank of Brazil (BACEN, 2020), entitled as seen below:

• Retail sales volume index - Cars, motorcycles, parts and pieces - SC 

• Formal employment index - SC 

• Balance of credit operations to individuals in SC - Total 

• Retail sales volume index - Cars, motorcycles, parts and pieces - SP 

• Formal employment index - SP 

• Balance of credit operations to individuals in SP - Total 

The results are presented in sequence in a synthetic way in tables for a better analytical comparison. Auto-regressive vectors (VAR) were developed with the application of Granger Causality to ascertain the existence of the lagged monthly relationship between the variables, followed by the application of the Impulse-Response Function to observe the direction of increase or decrease of the dependent variable when rising in one standard deviation the residual values of the independent variables.

For both states, the best lag between the variables in the AIC, HQ and FPE tests was 10 lags, all of which were treated in a second difference. Granger's Causality analysis showed that there is a lagged dependency relationship between all variables for both the state of São Paulo and Santa Catarina, since all p-values were significant (less than 5%) as can be seen in the Tables 1 and 2. It was also observed the impact that the impulse of a standard deviation in the residue of each variable causes in the responses of the others taken as dependent through the Impulse Response Function (FIR). In this regard, the most common trend of increasing or decreasing the variable in the computation of the 10 future months of forecast offered by the tooling was observed.

The comparative data between Santa Catarina and São Paulo point to equality in the sense of the impact caused by the increase in credit and employment, generating ten months ahead, increasing vehicle sales. Obviously, taking an unemployment scenario, a reduction in employment driven by a negative shock in the variable itself will incur a reduction in vehicle sales. The same reasoning is valid for a negative shock in the credit offer to individuals. It was also observed in the autocorrelation of sales on itself, that the increase in sales stimulates new sales in the future. In a complementary way, among the other findings, it is noted that the increase in the supply of credit to individuals translates into an increase in employment, which in turn will generate an increase in credit. This is a reciprocal effect that makes the whole economy revolve and develop, only care must be taken so that offering excessive credit for long periods does not lead to uncontrolled increases in inflation. Therefore, the nod for subsidies is punctual and very short term, showing that it is a remedy that over time loses its effect. The focus of state and federal governments should focus on stimulating the competitiveness and innovation of their factories as a whole for the constant generation of jobs, especially the automakers that have always been so characteristic and representative in several societies, including the Brazilian one.

In the future, at the end of the pandemic, we intend to complement this study by comparing these results with an equivalent analysis for the pandemic period, starting in February 2020 until its future official end as the objective in order to verify the impacts in the sale of vehicles in the face of offers of emergency assistance, breaking records of the number of unemployed - with the beginning of the increase in admissions in November 2020, this being the best result of the historical series of CAGED, registering creation of 414.5 thousand formal jobs (PDET, 2020) - and whether or not consumers' expectations of purchasing a new car in 2020 during the pandemic observed by Anfavea. This last relationship is very important to be effective because the reverse may have happened in this period, in which despite the rise of unemployment, the fear of using public transport due to the greater probability of contamination by the virus may have stimulated the purchase or exchange of a car. Of course, it should be noted in advance that many of the vacancies created and readmissions created since November are due to the readmissions of the massive layoffs of the pandemic period. In this way, all these considerations deserve a study in particular later for an effective future comparison to the pre-pandemic period analyzed here.

References

ANFAVEA. Estatísticas. Available at: http://www.anfavea.com.br/estatisticas. Accessed in: Dec. 22 2020a.

ANFAVEA. Intenção de Compra no Cenário Covid-19. Available at: http://www.anfavea.com.br/docs/webmotors_impacto_covid.pdf. Accessed in: Dec. 22 2020b.

BACEN. Banco Central do Brasil. Available at: https://www.bcb.gov.br. Accessed in: Dec. 10 2020.

ENGEPLUS. Santa Catarina registra crescimento de 17,47% nos emplacamentos de veículos automotores. Available at: http://www.engeplus.com.br/noticia/geral/2020/santa-catarina-registra-crescimento-de-17-47-nos-emplacamentos-de-veiculos-automotores. Accessed in: Dec. 22 2020.

GAZETA DO POVO. 4 pontos para entender porque a Ford decidiu fechar suas fábricas no Brasil. Available in: https://www.gazetadopovo.com.br/economia/ford-motivos-por-que-fechou-fabricas-brasil/. Accessed in: 13 jan. 2021.

PDET. Programa de Disseminação das Estatísticas do Trabalho. Ministério do Trabalho. Available at:  http://pdet.mte.gov.br/. Accessed in: Dec. 24. 2020.

SMABC. Sindicato dos Metalúrgicos do ABC. Outubro é o melhor mês de vendas em 2020 e Onix lidera. Available at: https://smabc.org.br/outubro-e-o-melhor-mes-de-vendas-em-2020-e-onix-lidera/. Accessed in: Dec. 22 2020.