Overview

Portugal’s economy is fully integrated into the European Union (EU).  Fellow EU member states remain Portugal’s biggest trading partners and its largest investors.  

The automotive sector in Portugal consists of 32,200 companies that manufacture automobiles and components, create 152,000 direct jobs, and generate a business volume of 33.7 billion euros, equivalent to 21% of the total fiscal revenues in Portugal.  This sector accounts for 11% of total exports from Portugal.  Portugal hosts over 220 automotive supplier companies and four major car manufacturers—Toyota/Salvador Caetano, PSA Peugeot Citroen, Mitsubishi Trucks, and Volkswagen AutoEuropa.

Interface and Industria 4.0 are two public programs with incentives to support innovation in the sector.

Automotive production is a significant industry in Portugal, with national importance for employment and exports.  Annual vehicle output surpassed 300,000 units for the first time in 2019, mainly owing to the performance of the Volkswagen Group (Germany), the largest vehicle producer in Portugal. 

Most cars manufactured in Portugal went abroad, and exports accounted for 97.9%.  Europe was the leading destination, especially Germany (20.4%), France (16.2%), Italy (11.7%), Spain (11.0%), and the United Kingdom (7.6%). 

The automotive sector is a key performer in the Portuguese economy.  In recent years, it has become highly positioned as it plays a vital role in the economy in terms of GDP.  The automotive sector is responsible for almost 8.5% of Portugal’s industry and 2.1% of the production of the Portuguese economy.  It employs 0.7% of the population and accounts for 4.8% of the manufacturing industry.  According to ACAP, the automotive sector in Portugal is responsible for 11% of total Portuguese exports.

According to ACAP, Stellantis (the automaker that emerged this year from the merger of France’s Groupe PSA and U.S.-Italian Fiat Chrysler Automobiles) was the domestic market leader with a share of 30.5% in the first two months of 2021.  Stellantis controls eight car brands in Portugal, including Peugeot, Citroën, Opel, and Fiat.  Peugeot was already the leading brand in 2020.  In second place was the Volkswagen Group, accounting for 12% of Portugal’s car market, followed by Daimler (including Mercedes-Benz and Smart) with 11.5%.  The share of Mercedes-Benz jumped to 11.3% in January-February 2021 from 8.7% a year ago.  The BMW Group (Germany) had a market share of 10.6% through its MINI and namesake brands, whereas Groupe Renault (France) accounted for 8.5% of the market.

In 2021, the automotive components industry in Portugal registered an annual turnover of around 10.7 billion euros, representing 5.6% of the country’s GDP, with a workforce of over 61,000 people in about 360 companies.  It represents 8.8% of manufacturing industry employment and is one of the leading exporting sectors in Portugal, with 16.1% of all tradable goods.  About 85% of the total automotive components produced in the country are exported.  The automotive components industry has grown 200% over the past 15 years and presently, Portugal is supplying carmakers with batteries, glass, plastic molds, interiors, tires, metal works, cables and harnesses, car seats, and electronics.

The Portuguese molds industry has been growing and consolidating its reputation in the international market, driven by external demand, integrated competencies, and innovative solutions it offers its clients.  Currently, the molds sector has 536 small and medium-sized enterprises dedicated to developing and manufacturing molds and tools, employing about 11 200 workers.  Portugal is among the world’s leading manufacturers of molds, particularly in injection molds for plastics (8th worldwide, 3rd in Europe), currently exporting about 85% of total production.  The automotive industry is the primary client for the molds sector, representing 71% in 2020.  Continuous technology update development of new products is a critical opportunity for U.S. companies.

Pandemic Impact

Automobile production in Portugal rose 1.9% in 2022, with 143,592 vehicles manufactured, according to the Automobile Association of Portugal (ACAP).  2022 also marked a positive number in vehicle production percentage for Portugal, showing good signs of recovery since the pandemic, where a fall of 23.9% in 2020 was registered. 

Exports of finished vehicles and parts in 2020 totaled €9.4bn, a drop of 22.5% compared with the previous year, according to data from the National Statistics Institute.  Component exports alone totaled €5.3bn in 2020, lower by about 10% yearly.  Quarantine measures forced the closure of automotive plants, cutting output last year.  New car sales declined 35% compared to 2019.

Market Entry

The most effective way to enter the Portuguese market is to partner with a local company that can act as a local representative and provides insights about the local market environment and trends. 

Barriers

The mandatory European approval and certification process can be challenging for U.S. vehicles and parts when exporting to Portugal.  There are no customs duties on imports from European Union (EU) countries.  The VAT in Portugal is 23%.  The VAT applies to all imports, including European and local suppliers.

Current Market Trends and Demand

Motorcycles

U.S. motorcycles such as Harley-Davidson, Buell, Polaris /IPS are sold in Portugal.  Portuguese continue to look for other means of transportation such as scooters and motorcycles.

Electric Vehicles and Hybrid Vehicles

Zero emissions vehicles (ZEV) and hybrid vehicles continue to receive growing interest.  These vehicles include Tesla, Toyota Prius, Honda Civic Hybrid, Lexus LS, GS and RX Hybrid, and Segway.  Portugal benefits from the first nationwide, fully interoperable electric mobility system, where users can charge vehicles at more than 11,950 charging points.  An emerging cluster around new mobility concepts and services in Portugal is attractive.  Portugal has adopted a welcoming attitude toward electric cars.  Portugal is an ideal location for the manufacturing of zero-emission vehicles.

The Mobi.E Network, or National Electric Mobility Network, is a network of 2,966 electric vehicle public charging stations for universal access, interoperable and centered on the user. Currently, the network has 5,310 charging points nationwide, with more than 900 being fast or ultra-fast charging points, in other words, their power is higher than 22 kW. (Source: Mobi.E and Mobienetwork)

In 2020 close to 35,000 new alternative-fuel vehicles (AFVs) were registered in Portugal, according to the European Automobile Manufacturers Association (ACEA).  The growth of new registrations slowed from 42.8% in 2019 to 38% last year, but the increase came from a high baseline and such vehicles accounted for 23% of all cars sold in 2020, compared with 10.8% in 2019.  Of the total in 2020, 7,830 were battery electric vehicles (EVs), whereas sales of all chargeable cars (including plug-in hybrids) reached nearly 20,000 units, up by more than 55%.  As in most of Europe, the Portuguese government unveiled a range of policy incentives in 2020 to promote a green recovery from the coronavirus in addition to previous measures.

In January, 2,405 electric vehicles were sold (100% electric and plug-in hybrid), considering all categories of light and heavy vehicles, representing a growth of 68.9% compared to the same month of the previous year.  January 2022 marked 1138 electric vehicles (BEV - Battery Electric Vehicle) sold, which revealed buyers’ sustained interest in fully electric cars.  These great sales numbers were attributed to strong demand from increasingly well-informed citizens.  The recovery of economic activities, shaken by the pandemic, also allowed an increase in sales of light passenger vehicles with internal combustion engines (VCI), but a much lower increase than that of electric vehicles (EV).  While VCI sales grew 20%, EV sales grew 69.3%, representing a market share of 15.4%.  Plug-in hybrid vehicles (PHEV – plug-in hybrid electric vehicle) also registered growth, in this case of 7.4% compared to May 2021 and 93% compared to the same month of the previous year.

Government benefits and incentives for the acquisition of 100% electric vehicles: €3,000 Incentive for the acquisition or leasing of an electric, light passenger vehicle, until the limit of 700 vehicles, through the Environment Fund and €6,000 Incentive for the acquisition or leasing of an electric, light goods vehicle, until the limit of 150 vehicles.

Aftermarket Accessories

The market for automotive accessories and specialty equipment in Portugal and distribution channels primarily consist of small importers. Although it is considered a small market compared to neighboring Spain, it is an ideal market for product acceptance studies, serving as a gateway to enter other European markets and Portuguese-speaking markets.

Acceptance of U.S. products and new technology in Portugal is very high and well-received by local companies. Over the past years, Portuguese have become fans of a wide range of products such as passive and active security systems, eco-friendly automotive solutions, diagnostic and testing tools, and car entertainment systems. 

All products with cutting-edge technology can be placed in the Portuguese market. As a rule, Portuguese are ready to consider new products and pay extra money for something that is or seems to be unique and innovative. 

Smaller Engines

Europe’s best-selling car models can be equipped with 3-cylinder engines of 1000cc or less.  This is the measure brands take to meet emission limits for pollution gases and to contain the production and sales costs of the latest cars, thus providing more technology while maintaining comparable prices.

SUV

Revenue in the Small SUVs market segment is projected to reach US$1,329.00m in 2022, and segment unit sales are expected to reach 42.7K vehicles in 2026.  This growth is expected as implementing new technologies in these cars will make them even safer, more comfortable, and more practical.

Gasoline engine VS Diesel engine

Diesel cars are losing market share.  According to ACAP - Associação Automóvel de Portugal (Automobile Association of Portugal), of the 223,799 light passenger cars sold in 2019, 49.2% have a gasoline engine, and 40% have a diesel engine.  Despite that, the number of diesel-engine commercial vehicles is still overwhelming: 99.1% of the 38,454 cars in this market are diesel, and only 0.2% (90 vehicles) have a gasoline engine.

In alternative engines to fossil fuels, sales of electric and plug-in hybrids are also noteworthy.  There was an increase of 3.3% in electric/gasoline hybrids to 8545 units and almost zero growth in electric/diesel hybrids (+0.3% for 883 cars sold).  On the other hand, plug-in/gasoline grew 1.8% to 4,653 vehicles sold; plug-in/diesel grew 0.4% to 1,145 units.  As a result, pure plug-ins or hybrids increased the market share to 8.5%.

Leading Sub-Sectors

This industry is divided into three main groups:

Motor vehicles for all purposes, including tractors; parts and accessories; and chassis, bodywork, trailers, and semi-trailers.

Main Competitors

U.S. exporters generally will face intense competition from European and Chinese suppliers but are well positioned as a supplier to the Portuguese automotive market.

Opportunities

Electric Drive Vehicles

The European Commission (E.C.) is proposing a reduction to zero of CO2 emissions from new cars sold in the bloc by 2035 in a plan that will effectively ban sales of vehicles with gasoline and diesel engines.  The Portuguese support the E.C. proposal, and the industry will have to modernize and be ready for the new market needs. 

The European Commission approved 20 billion euros ($22 billion) to incentivize consumers in the 27-nation bloc to buy environmentally friendly passenger cars. 

Mobility Applications

Applications such as Uber, Cabify, or Taxify have gained a strong foothold in the disruptive automotive market.  Portugal has embraced mobility apps, and usage in urban areas is increasing, especially for complementary transport such as electric scooters.

Batteries

The Batteries 2030 project, aiming for a lithium battery industry in Portugal with investments of 8.3 million euros, was presented in July 2021.  The project will work in five areas: energy storage (particularly in manufacturing new generation lithium batteries), hydrogen, second-life battery cycle, decentralized energy production, and energy management platform.  Of the 23 partners in this project, 14 are companies, and nine are scientific entities under the coordination of the INL – International Iberian Nanotechnology Laboratory. 

Resources

Automobile Association of Portugal

Portuguese Association of Automotive Suppliers

Automotive Cluster MOBINOV

European Union Mobility and Transport

The Observatory of Economic Complexity (OEC) – Portugal

Key Government Regulatory Agencies

Automobile Association of Portugal - https://www.acap.pt/

AFIA - Portuguese Manufacturers Association for the Automotive Industry - https://afia.pt

Automotive Cluster MOBINOV - https://www.mobinov.pt

Leading Products – NAICS

• Automobiles & other vehicles, wholesale – 421110
• Motor vehicle supplies and new parts distributors – 421120
• Car dealer SIC code – 44110
• Gasoline service stations – 447110
• Recreational vehicle (RV) dealers – 441210
• Motorcycle dealers SIC code – 441228
• Passenger car rental businesses – 5322111
• Mechanic SIC code – 811111

               Source :

https://acap.pt/site/uploads/paginas/documentos/8681E9A5-B9F30_1.pdf

https://observatorioauto.pt