Brazil does better with hybrid cars and would lose with electric ones, says study

Brazil has more to gain from hybrid vehicles than from fully electric cars. This is what a study conducted by LCA Consultores and MTempo Capital points out, which estimates the economic impacts of the two aspects on Gross Domestic Product (GDP), production, employment and tax collection between 2020 and 2050.

The survey shows that in the decarbonization driven by combustion engines and batteries – hybrids –, the country could have gains of approximately R$ 2.3 trillion by 2050. On the other hand, if the direction tends towards pure electric, the estimate is loss of around R$5 trillion in the same period.

The numbers refer to total production, but there is also a loss in other areas. In the prevalence of hybrids, the effects of decarbonization are positive for jobs, with a sum of over R$1 trillion for jobs, R$877 billion for GDP and R$318 billion in taxes.

Pure electric vehicles, on the other hand, all lead to losses in these aspects. In jobs, R$597 billion, and in taxes, R$678 billion. In terms of GDP, the impact exceeds R$1.8 billion (in addition to R$5 trillion in production).

This happens mainly because, even though electric vehicles are, on average, more expensive, they do not add as much to the production cycle. The research highlights that there is a lack of a production chain for the manufacture of batteries and equipment intensive in basic inputs, components, parts and national parts.

In the case of hybrids, it is precisely the high demand for local content that adds new components at various stages of the production chain and ends up boosting the economy. However, in the future, it is possible that the eventual nationalization of the production of inputs and battery components will reduce the negative economic impact of fully electric vehicles.

Luciano Coutinho, partner at MTempo Capital, highlighted that in all aspects the hybrid has better results, but considered that the research considers the supply chain and current technology. He presented the study at an event by the Esfera Brasil group, in Brasília, this week.

“From the point of view of employment, income and added value in the country, the hybrid route is clearly superior. Obviously, these routes and calculations project the current picture and, certainly, technological change and process advances could change”, said the executive, who is also former president of the National Bank for Economic and Social Development (BNDES).

The research also analyzed carbon emissions from the exploration of minerals for the production of batteries and other vehicle parts to the disposal of shipped materials. The conclusion was that hybrids generate less CO2.

At the same event, BNDES president, Aloizio Mercadante, said that the promising route for electrification in Brazil is that of hybrid cars, and defended the government’s decision, last year, to tax the import of electric cars again.

These vehicles have been exempt from Import Tax since 2015. In 2023, the government decided to return to gradual formal taxation starting this year, reaching up to 35% in 2026.