Four years ago, VW’s plant in Resende, Brazil, was bustling, with workers churning out trucks six day a week. But in 2013, a political crisis engulfed the country, throwing the economy into chaos. Sales of commercial vehicles tanked, and production at Resende stalled.
As demand for delivery services in Brazil’s urban areas picks up, however, Volkswagen is betting on a rebound. The world’s largest carmaker is now sinking €260 million into its new, lighter-weight Delivery models – its largest investment in a commercial vehicle for the Brazilian market in more than a decade.
Brazilian commercial vehicle sales could boom again in 2019, said Roberto Cortes, the Latin America’s CEO of MAN, a truck brand of VW. Local market leader Daimler, with its Mercedes-Benz division a major truck maker, is operating according to similar calculations, predicting 20 percent growth next year alone. VW has been trying to regain the upper hand in Brazil against its Stuttgart-based competitor for the past 13 years.
At its Resende plant, VW recently unveiled its twist on the old classic: six trucks geared toward city driving, weighing in at 13 tons and under. Brazilian engineers worked with Wolfsburg-based Albert-Johann Kirzinger, Volkswagen Commercial Vehicle’s head of design, to achieve “a difficult task,” as he put it.
The reason, according to Mr. Kirzinger: “The previous Delivery model was hugely successful in Brazil.” Alongside that version, VW plans to offer up new models with 7 to 10 percent higher price tags.
Volkswagen is not expecting Brazilians’ appetite for commercial vehicles to change overnight; sales are still shaky and expected to decrease slightly this year, according to the country’s carmakers’ association, Anfavea. Eventually, however, the company expects Brazil to fall in line with a global trend toward light- and medium-weight trucks better equipped to handle city streets.
“By 2025, five percent of local delivery vehicles in Brazil will run on electric power.”
Mr. Cortes of VW truck brand MAN, said the goal is to boost revenues of lighter commercial vehicles to 40 percent of total sales, compared to the current one-third.
If the abundance of smaller models on show at this year’s Fenatran trade show in São Paulo was any indication, Volkswagen’s competitors are catching on, too. Commercial vehicle makers are taking their cues from Brazil’s cities, where there is a growing need for compact trucks to supply retailers, restaurants and shopping malls. A boom in online purchases also means increased demand for delivery services, and the vehicles that serve them.
The shift to light-weight trucks is also a result of the toll that Brazil’s crisis has taken on the country’s economic heavyweights, such as mining and construction companies. Those industries will likely need more time to recover before they’re ready to place new orders for larger commercial vehicles.
For truck makers, small and mid-sized fleet and transport firms are the new target customers. To attract them, there’s the option of paying in installments over a period of up to six years – no more than “30 [Brazilian] real per day,” according to one advertisement. This comes down to around €200 ($237) per month.
Another advantage is that anyone with a regular driver’s license can get behind the wheel of the starter model, the Delivery Express. “It’s a compact van with the design and carrying capacity of a ‘real’ truck,” independent commercial vehicle expert Robert Queiroz told Handelsblatt.
If all goes according to plan, Volkswagen forecasts annual sales of about 30,000 new Delivery models in Brazil and other parts of Latin America. Eventually VW hopes to move 100,000 units worldwide – one reason the carmaker is gearing up to expand sales into Europe in the coming years.
It is still unclear which of VW’s commercial vehicle brands will get to market the new Delivery. “In emerging markets, it’s more likely that the model will fall under the VW flag,” Mr. Queiroz said. “In Europe, the Delivery could be incorporated into MAN’s range of models after that.”
The focus there will likely be on battery-powered trucks, however. VW has teamed up with electric motor builder WEG and the e-bus supplier Eletra to build Volkswagen’s e-models in Brazil, with series production also set to start by 2020.
VW plans to test 10 prototypes in both Brazil and Europe over the next two years. Volkswagen Truck & Bus boss Andreas Renschler estimated that by 2025, five percent of local delivery vehicles in Brazil would run on electric power.
Alexander Busch is Handelsblatt’s South America correspondent. To contact the author: firstname.lastname@example.org