In Brazil’s automotive sector, continued subsidies for imports of electric vehicles are causing divisions.
Some are demanding that the subsidies be scrapped, while others are defending them as a means of boosting local manufacturing.
From 2015, electric cars (EVs) and parts for EVs have been exempt from Brazil’s vehicle import duty, which is currently set at 35%. Because of this strategy, the country is now the largest EV market in Latin America, with a fleet of 126,504 electric and hybrid vehicles, of which 40 percent were registered in the year 2022.
According to the findings of a study conducted by Bright Consultant, a business management consulting organisation based in Campinas, Brazil, the introduction of those subsidies more than seven years ago has led to a loss of tax income in the amount of $3.6 billion.
Anfavea, the Brazilian automakers organisation, is now working on a plan that would put a stop to the subsidies. The group’s president, Marcio Leite, has stated that the subsidies will permanently impede local production if they are not eliminated.
“That is acceptable if the volume stays at its current level. Leite stated this in a recent press conference: “But if the rule is in place, China might sell vehicles on the Brazilian market that are sold for $5,000.”
This pricing is lower than the price of any utility vehicle that runs on gasoline, and it is four times less expensive than the price of the most popular electric vehicles.
However, there are some people working in the automotive industry who believe that the subsidies are necessary in order to bring the price of electric vehicles closer to the price of other more accessible and “green” alternatives. These people point to vehicles powered by ethanol as an example; Brazil has been using ethanol as a fuel for several decades now.
When compared to a car that can run entirely on ethanol, an electric automobile makes little sense as a mode of transportation. Carlos Tavarez, CEO of Stellantis, the fifth-largest manufacturer in the world, whose brands include Fiat, Chrysler, and Peugeot, made this statement lately. “Not to mention that it is significantly more expensive for the middle class,” Tavarez remarked.
For instance, Santiago Chamorro, president and managing director of General Motors South America, claimed that tax breaks are necessary to encourage local manufacture at an event that took place in São Paulo.
According to the Colombian executive, Brazil possesses a “favourable scenario, a wealth of minerals for batteries, an existing industrial park, and a clean energy matrix.” He went on to say that these characteristics may make Brazil a “manufacturing and exporting hub” for electric vehicles.
Head of Brazilian Association of Electric Vehicles (ABVE) supports tax reductions on electric vehicles
According to statements made by Alberto Maluf, the head of the industry group known as the Brazilian Association of Electric Vehicles (ABVE), the organisation supports not only tax reductions but also additional public measures that are favourable to the sector.
It cited, among other measures, the example of a law passed in Brazil’s Atlantic Ocean archipelago of Fernando de Noronha, which prohibits the entry of vehicles powered by fossil fuels and mandates a fleet that is 100 percent electric by the year 2030. This law went into effect at the beginning of 2023.
The market for electric vehicles and hybrids has been rapidly increasing in Brazil, thanks in part to the incentives provided by the government.
According to the ABVE, sales of electric and hybrid vehicles totaled 49,245 in 2022, which was a 41 percent increase from the previous year (2021). The organisation also stated that EV manufacturers’ current 2 percent market share is likely to expand to 5 percent in 2023.
According to the ABVE, the number of public charging stations in Brazil’s network for recharging electric vehicles increased by a factor of three in 2022, bringing the total number of such stations to approximately 3,000.
At the moment, the largest electric vehicle (EV) facilities in Brazil are owned by Chinese companies BYD and Chery as well as Japanese company Toyota. EFE
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