Toyota Touts New Ethanol Hybrid Technology, Laments Brazil Woes

(Bloomberg) -- Toyota’s new ethanol hybrid vehicle being developed in Brazil is exceeding all the manufacturer’s expectations, said Steve St. Angelo, the carmaker’s CEO for Latin American and the Caribbean and its chairman in Brazil.

The car differs from other Toyota hybrids in that it combines an electric motor and a flex variant that runs on gasoline and ethanol. That last bit is significant since Brazil is the world’s largest producer of the biofuel. The vehicle shouldn’t take more than three years to get to market, St. Angelo said.

"The soonest I can put it in production, I’m going to do it," the CEO said in an interview at an auto show in Sao Paulo last week. He didn’t say how much is being invested in the project, but, "It’s not a lot, it’s really just some tweaking and some calibration."

The optimism surrounding the preliminary results of the new technology unfortunately doesn’t change the fact that Brazil’s car market has fallen short of expectations thanks to a slow recovery from the country’s worst-ever recession. In addition, Toyota’s factories in Brazil and Argentina aren’t competitive globally thanks to high taxes and complex bureaucracy, making the investments in those countries double or triple elsewhere.

"We need to be competitive," St. Angelo said. "Our home countries are not going to give the money just because we are nice guys in Brazil. You have to have a good business case."

Lower logistics costs, better infrastructure and better schools are needed for local production to be priced to sell abroad, he said. The government is trying to address concerns and make the industry more competitive with a policy that the president sanctioned earlier this month.

"I have to compete against the United States, against other countries," St. Angelo said. "I have 40 countries I’m responsible for, why can’t I export Brazilian-made Corollas to my 40 countries? It breaks my heart."

The recent downturn in Brazil drained demand, which had been expected to boom. In 2011, car sales were predicted to reach 5.5 million by 2018. According to the national carmaker association, that figure is unlikely to exceed 2.5 million.

"During the recession, we never laid-off anyone, because we believe in Brazil," St. Angelo said. "We don’t want to compete only in Brazil, I don’t want to compete only to sell cars in Argentina. I want to compete globally."

To contact the reporter on this story: Leonardo Lara in Sao Paulo at llara1@bloomberg.net

To contact the editors responsible for this story: Courtney Dentch at cdentch1@bloomberg.net, Christiana Sciaudone, Larry DiTore

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