Commercial Vehicles and Off Road Machines - Brazil

April, 30th 2020

Carlos Alberto Briganti

About us

Products and Services

Content

• Power Systems Research

• Overview

• Volumes – actual/fcst

- Commercial Vehicles - > 6 ton

- Agricultural Machines

- Construction Machines

• 2020 – LARGEST GRAIN CROPS OF THE HYSTORY

• GOOD PRICES PRICES FOR AGRICULTURAL AND MINING COMMODITIES: Soyo Bean and Iron Ore

• POTENTIAL INFRASTRUCTURE INVESTMENT

• ROAD TRANSPORTATION ESSENTIAL ACTIVITIY IN THE CRISIS

• RECOVERY EXPECTATION : Starting Q3/20, Normal activities: Q4/20

• REDUCTION OF INTERESTED RATE TO LOWEST LEVEL OF THE HYSTORY

• CREDIT AVAILABILITY FOR AGRICULTURE

• OEM´s PRODUCTION LOCKDOWN

• CASH SHORTAGE – Mainly in the Tier 2&3 Sypply Chain

• GDP: Reduction of 4/5% in 2020. Recovery of 2/3% em 2021

• INCREASE OF PUBLIC DEFICIT : Restriction of government investment

• INCREASE OF UNEMPLOYMENT

• HEALTHY/ECONOMIC/POLITICAL CRISIS – “PERFECT STORM”

• CONFIDENCE IMPACTED BY UNCERTANTIES

• GLOBAL RECESSION IMPACTING VEHICLES AND MACHINES EXPORT

Overview

Infrastructure Investment in Brazil

Source: FIESP - 13º Construbusiness, 2017/ Valor Setorial, 2018

36%

31%

13%

11%

9%

Infrastructure Investment Pent Demand

Roads, Railway, Ports, Airports

Electricity

Sanitation

Telecom

Mobility

5,5% of GDP

R$ 350 Bi/y

2018-2038

5.50%

3.62%

2.27% 2.12%

1.40%

1970 1980 1990 2000 2017

Infrastructure Investment (% GDP)

2019

GDP – R$ 7,44 trilhões

Infrastructure – R$ 135 bilhões (1,88%)

Action Plan in the crisisGovernment Investment: R$ 30 bilhões

Search for private/foreing investment: R$ 600 bilhões

149.2 162.8 166.2188.7 193.6 207.8

186.4

237 225.6 242.1 252293.5

2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2027/28

Grains harvester production (x 1.000.000 t)

47.4 49.9 50.9 53.6 57.1 57.9 58.2 60.9 61.5 63.2 65.169.5

2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2027/28

Planted Area (x 1.000.000 ha)

Brazil – Agribusiness Productivity

Fonte: CONAB / Embrapa

Off Road Machines – PRODUCTS COVERAGE

Wheel Tractors

Dozers

Combines

Harvesters

Sprayers

Excavators

Backhoes

Motor Graders

Mini Excavators

Pavers

Rollers

Tree Harvester

PSR

Wheel Tractors

Dozers

Combines

Harvesters

Backhoes

AGCO

Agrale

CaterpillarCNH Industrial

John Deere

Komatsu

AGCOAgrale

Caterpillar

CNH Industrial

John Deere

Komatsu

Ammann

Bomag Marini

Budny

Dynapac

Hyundai Construction

Jan

JCBKUHN

Landini TratoresLiebherr

LiuGong

LS Tractor

Mahindra

Jacto

Randon

Romanelli

Sany

Stara

Valtra

Volvo CE

Weber

XCMGYanmar

Off Road Machines – OEM’s COVERAGE

PSR

78 79

91

81

6057

6370

60

51

62

76 76

87

77

5955

5965

5548

57

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Production (x1000) Sales (x1000)

Agricultural Machines – Production & SalesAct/Fcst

• Agribusiness keeping productivity and growth

• Reduction in 2019 due credit constrain

• COVID 19 in 2020 impacting normal business

• Tight cash control during crisis

• Anticipation of fertilizers purchase

• Global recession impacting machines export

80k

60k

Source: PSR OE LinkTM (Production and Sales)

• Productivity

• Low interest rate

• Credit availability

• High commodities price

• Potential pre-buy due credit and

interest rate

• Political and economical crisis

• Credit restriction

• Fertilizers cost going up

• Commodities prices going

down

30 29

32

26

15 16 17

22

26

20

2424 23

32

25

12

87

14

18

14

18

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Production (x1000) Sales (x1000)

Construction Machines: Production & SalesAct/Fcst

• Recovery started with exports in 2017

• Utilization of CE machines in Agriculture

• Construction moving down after recovering in 2019

• Covid19 in 2020 impacting normal business

• Potential investment in infrastructure would accelerate recovery

• Global recession impacting machines exports

30k

16k

Source: PSR OE LinkTM (Production and Sales)

• World Cup

• Olympic games

• Government incentive program

• 6,000 machines donated to

town halls

• Low interest rate

• Newcomers

• OEMs Capacity Expansion

• Market of 32000 units

• Political and economical

crisis

• Infrastructure on hold

• Some newcomers phasing

out

• Mining – commodities prices

down

• Credit restriction

• Interest rate raising

223

171

94

77

101

132 140

87

133

182

161

85

58 60

87

117

76

117

-

50

100

150

200

250

2013 2014 2015 2016 2017 2018 2019 2020 2021

TSD

Commercial Vehicles: Production & Sales Act / Fcst

Source: PSR CV LinkTM (Production and Sales) and ANFAVEA

200k

90k

• Interest rate below inflation

• Credit availability

• Potential pre-buy

• Recovery started in 2018

• Covid19 impacting normal business in 2020

• Bus segment more impacted than Heavy trucks

• Global recession impacting vehicles export

• Potential recovery in 2021 to the same Sales level of 2019.

• Political and economical crisis

• Infrastructure on hold

• Some newcomers phasing out

• Currency depreciation

• Credit restriction

• Interest rate raising

Carlos A. BrigantiManaging Director South America

cbriganti@powersys.com

+55 19 99183 3330

+55 19 3305 5657

Thank you!