EV import subsidies divide Brazil’s auto industry

By Waldheim Garcia Montoya

Sao Paulo, Mar 16 (EFE).- Continued subsidies for imports of electric vehicles are causing divisions within Brazil’s automotive sector, with some insisting they be scrapped to boost local manufacturing and others defending them as a means of bolstering EV sales.

Since 2015, EVs and parts for those vehicles have been exempt from Brazil’s 35 percent vehicle import tariff.

That policy has helped make the country the biggest EV market in Latin America, with a fleet of 126,504 electric and hybrid vehicles, 40 percent of which were registered in 2022.

The introduction of those subsidies more than seven years ago has resulted in a loss of tax revenue of $3.6 billion, according to a study by Campinas, Brazil-based business management consulting firm Bright Consultant.

Brazil’s Anfavea automakers association is drawing up a proposal aimed at ending the subsidies, which its president, Marcio Leite, said will otherwise permanently hinder local production.

“If the volume remains low, that’s fine. But if the rule stays in place, China could place vehicles on the Brazilian market that are sold for $5,000,” Leite said in a recent press conference.

That price is lower than that of any gasoline-powered utility vehicle and four-times less than the price of the most popular EVs.

But some within the auto sector say the subsidies are necessary to bring the cost of EVs more in line with the price of other more accessible and “green” alternatives, including vehicles powered by ethanol, a vegetable-based fuel that has been used for decades in Brazil.

“An electric car makes no sense when compared to a car that can run 100 percent on ethanol. Not to mention that it’s much more expensive for the middle class,” Carlos Tavarez, the CEO of fifth-largest global automaker Stellantis, whose brands include Fiat, Chrysler and Peugeot, said recently.

The president and managing director of General Motors South America, Santiago Chamorro, for example, argued at an event in Sao Paulo that tax exemptions are needed to incentivize local production.

Brazil has a “favorable scenario, a wealth of minerals for batteries, an established industrial park, and a clean energy matrix,” the Colombian executive said, adding that those conditions could make the country an electric vehicle “production and exporting hub.”

The Brazilian Association of Electric Vehicles (ABVE) not only advocates tax cuts but also additional public policies to favor the sector, the president of that business group, Alberto Maluf, told Efe.

Among other measures, it cited the example of a law passed in Brazil’s Atlantic Ocean archipelago of Fernando de Noronha that, since the start of 2023, has barred the entry of fossil fuel-powered vehicles and mandates a 100 percent electric fleet by 2030.

Thanks in part to government incentives, the market for EVs and hybrids in Brazil has been rapidly expanding.

In 2022, 49,245 electric and hybrid vehicles were sold, up 41 percent from 2021, according to the ABVE, which said EV manufacturers’ current 2 percent market share is expected to climb to 5 percent in 2023.

Brazil’s electric vehicle charging network, meanwhile, tripled in size in 2022 and currently comprises around 3,000 public charging stations, according to the ABVE.

At present, the biggest EV factories in Brazil are in the hands of China’s BYD and Chery and Japan’s Toyota. EFE

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