In April, Brazil imported 40,900 electric and hybrid vehicles from China, 13 times more than in April last year. With this, the country overtook Belgium as the main destination for exports of this type of car from Chinese companies and also became the second largest of all types of cars from the Asian giant, behind only Russia.
The reason, in part, has to do with the Brazilian import tax for electric, hybrid and plug-in hybrid cars (also known as PEV, the electric battery of these vehicles is the main energy source), which resumed in January this year and is expected to increase until next year. Chinese dealers have taken advantage of the window to market more vehicles before the progressive increase in the import tax reaches 35% in July 2026.
In addition, taxes increase according to how electric a car is.
In a press conference at the end of his trip to China, the Brazilian Vice President and Minister of Industry, Geraldo Alckmin, made comments on tax resumption: "The import tax on vehicles is set to rise to 35%. It will get there, [so China should] install car factories in Brazil.”
The Brazilian Minister of Development, Industry, Trade and Services said that, to provide a period for the installment of factories and electric cars to take over the market, a tax-free import quota was implemented for each category. In other words, taxes are only applied if these quotas are exceeded. The quota will also be gradually reduced until 2026. Streetcars for cargo transportation or electric trucks will be taxed at 35% in July this year, as this is the most developed sector in Brazil.
Mover Program
After being recently approved by Congress, Brazil's Mover Program has to be sanctioned by President Lula until July 8. It aims to "decarbonize" the automotive industry in various sectors by adopting the idea of reducing carbon emissions "from well to wheel", that is, throughout the entire productive chain. As a result, most companies the government has approved so far (see the list) are from the auto parts sector.
In all, the government has approved BRL 19.3 billion (US$ 3.47 billion) in tax credits for companies participating in the program, from 2024 to 2028. The incentive for registered companies varies between BRL 0.50 and BRL 3.20 for each real invested in research, development and technological production aimed at decarbonizing the fleet of cars, buses and trucks in Brazil.
"What does Mover do? It will stimulate innovation. We want an innovative industry stimulating decarbonization by taking various technological routes," said Vice President Alckmin at the press conference in Beijing.
"Brazil is privileged: the country is going to have pure electric vehicles, plug-in, hybrid… But it can grow a lot, and we can have electric and flex-fuel cars, hybrid ones [...] In Brazil, we're making second-generation ethanol, for example," said Alckmin on the direction of CO2 emissions reduction in Brazil.
According to the Brazilian government, companies' investments announced within the program's framework already total US$ 130 billion.
China's BYD is already one of the 69 companies qualified to take part in Mover. It plans to start its first large-scale electric car production in Brazil later this year, at its new factory in the city of Camaçari, Bahia. Before the rise in import tax in July, the company intends to import another 100,000 cars.
China's Great Wall Motors has also applied to join the program. The automaker aims to start producing electric cars in the second half of the year at a former Mercedes-Benz plant in Iracemápolis, in the state of São Paulo.
Chinese electric cars targeted by the Global North
Brazil has implemented import taxes on electric vehicles, regardless of the country of origin. Last month, Joe Biden's administration announced that tariffs on imports of Chinese electric vehicles alone will rise from 25% to 100%. After the United States, the European Union announced tariffs on the same Chinese products, with rates of up to 48% depending on the Chinese company.
Both argue that China uses "unfair trade practices", with the Europeans specifically accusing "unfair subsidies" in the electric car value chain.
At the same time, and despite some complaints made in the European Union against the Biden administration's IRA (Inflation Reduction Act), which made US$ 105.8 billion available to the electric vehicle industry (according to a survey by Atlas Public Policy), no investigations or hypothetical tariffs have been established against US companies.
In the EU's investigations, Chinese companies subjected to inspections complained that during the investigation, the bloc's authorities even demanded the companies to hand over formulas for their electric batteries.
Unlike in Brazil, US and EU taxes are aimed exclusively at Chinese vehicles.
China has said it reserves the right to initiate proceedings at the World Trade Organization (WTO) in response to the measures. He Yadong, spokesman for China's Ministry of Commerce, said that the conclusions of the EU investigations "lack a factual and legal basis."
Yadong also said that the measure disrupts the "mutually beneficial" cooperation between China and Europe in the electric vehicle sector, "but also distorts the industrial and supply chains of the global automotive industry, including those of the European Union itself."
Countries like Germany and Sweden are among the countries with the greatest concerns about the imposition of tariffs on Chinese electric cars. Almost 29% of the cars manufactured by German automakers in 2023, for instance, were sold in China.
Edited by: Rodrigo Durão Coelho
