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Cuba has been all over the news after Presidents Barack Obama and Raúl Castro announced in December that the United States and Cuba would resume diplomatic relations. Cuba was even part of President Obama’s State of the Union address this week. Many executives in the American automotive industry got excited about the possibility of exporting to Cuba again, remembering that the island was an American paradise in the 1950s.
However, I am afraid many people are not considering several facts that could indeed help Latin America, rather than the U.S., begin to export light vehicles to Cuba. First of all, Americans and the economic sanctions have been blamed for everything that does not work in Cuba. Why assume that, out of the blue, Cubans would want to buy an American car? No real need to for consumer research to answer that.
Furthermore, American cars are expensive. The U.S. is a mature market, where rear view cameras are about to become mandatory, for example. It is very different below the Southern border. For example, just last year Brazil started requiring ABS and airbags. Another example: Mexico has become a great auto exporter to the U.S., but the best-selling vehicles in Mexico, such as the Chevrolet Aveo and the Nissan Tiida and Tsuru, are not exported to the U.S. anymore – and in some cases, have never been.>
In these years when American cars could not be exported to Cuba, Chinese brands – and a few Peugeot vehicles – made their way to the island. That is why it makes me think that one Chinese brand in particular could benefit from the end of sanctions. While it is personal speculation, I have Chery and its new plant in Brazil in mind when I say that.
Chery opened the Jacareí plant in August 2014, its only factory outside of China able to fully build a vehicle - all the other ones are CKD operations. Until December, it only made pre-series units, but our light vehicle production forecast accounts for approximately 30,000 units this year of three different models: Fulwin 2 (locally sold as Celer), QQ and Tiggo5. Among all the OEMs opening plants in Brazil, Chery is the only one saying it will use Brazil as an export base.
Chery's Jacareí Plant Forecast
2015 2016 2017 2018 29,143 45,116 47,536 50,337
Source: IHS Automotive
Another fact that would help Chery is the relationship that Brazil has had with the Cuban government. During Brazil’s presidential elections last year, President Dilma Rousseff was heavily criticized because Brazil financed the Mariel port in Cuba. The port cost USD957 million, and USD682 million was financed by the Brazilian development bank – the same bank that has financed OEMs building plants in Brazil, among several many other projects in all industries. During the port opening ceremony in January 2014, President Rousseff said that Brazil wants to become a very close economic partner with Cuba. Brazil is currently the third main exporter to Cuba, just behind Venezuela and China.
Of course all this is just speculation. The end of the embargo needs to be approved by a Republican Congress: “And this year, Congress should begin the work of ending the embargo,” said President Obama during the State of the Union. Place your bets when this is going to happen so Cubans can drive American cars again. Meanwhile, we'll be watching closely as something could be happening among Cuba, China and Brazil.
Augusto Amorim is senior analyst, South American light vehicle production forecast, IHS Automotive
Posted January 22, 2015


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