Car: automakers want to limit imports – 09/05/2023 – Market

Companies associated with Anfavea (an entity that represents vehicle manufacturers) are uncomfortable with the growth of new Chinese brands in Brazil and demand a containment plan. One of the trending ideas is the proposal that will make it difficult to import vehicles, parts and machinery.

The plan that must be presented to the government is based on environmental efficiency in production lines. The objective is to limit the entry of manufactured goods from countries that have more permissive environmental legislation than Brazilian standards.

In this way, the measure would directly affect vehicles imported from China, even if they are 100% electric. In the view of automakers associated with Anfavea, these cars have tax incentives such as exemption from Import Tax (rate of 35%), but are manufactured in a country that requires less investment in adapting its assembly lines to the environmental agenda.

Márcio de Lima Leite, president of Anfavea, says that the topic has been discussed, but has not yet entered the analysis phase to define how it could be applied.

“I think this is a process that will naturally happen, but it is still not being addressed. Today there is a lot of pressure for decarbonization in the production process, and the rigor is increasing more and more. The logic is: why is this rigor worth it? for the local manufacturer and not for those who only place their products in Brazil and who, in a way, are taking jobs out of the country?”, said the executive to Sheet.

This week, Anfavea presented the updated sales and production numbers to the Lula government, but also spoke about the need to define how the new PAC will influence the industry. One of the points advocated is that environmental criteria be used in bids aimed, for example, at the supply of machinery for works.

This point already contemplates the plan that is being prepared by the automakers. The objective is to make foreign companies whose countries are subject to more lenient environmental rules —with a production chain considered “dirty”—lose points in this bidding process.

The project, however, refers to what happened in October 2011, when a surcharge of 30 percentage points was created that directly affected the rate of IPI (Tax on Industrialized Products).

At the time, South Korean brands were becoming competitive. There was still the fear that Chinese companies would grow in the market, since JAC Motors managed to compete with attractive prices even though it paid the 35% rate of import tax.

The current scenario, however, is different. The new automakers coming from China already have confirmed assembly lines in Brazil, precisely in line with the Rota 2030 program. The plan that succeeded Inovar-Auto grants tax benefits to encourage local production.

However, for competitors, there is a competitive differential that favors importers.

While they do not start national manufacturing, brands like GWM and BYD bring electrified cars to Brazil. Because they rely on these less polluting technologies, these vehicles disembark exempt from import tax. As at the beginning of the last decade, these vehicles arrive at a competitive price.

The GWM Ora 03 and BYD Dolphin hatches, for example, cost R$ 150,000 in the domestic market. They are 100% electric vehicles that compete for space with flex-fuel cars made in Brazil.

In Anfavea’s view, there is also a problem for the export sector. According to the entity, cars and machinery made in Brazil have lost ground to the Chinese in Latin America.

“Until 2021, Brazil was the country that most exported to neighboring countries. Last year, China took the lead, with 21.2% of presence, against 19.4% of Brazil. We urgently need to increase our competitiveness to export , or we will lose even more ground in our main destinations, not only to China, but to other emerging countries in Asia, such as India, Thailand and Indonesia”, said Leite, in a note.

The president of Anfavea also said that it is necessary to resume the Import Tax of 35% for electric and hybrid models. In 2023, according to the association, around 30,000 units of these models have already come from China to Brazil this year.

Ricardo Bastos, director of institutional affairs relations at GWM and president of ABVE (Brazilian Electric Vehicle Association), says that when production of hybrid and electric vehicles begins in the country, imports will naturally be reduced.

Regarding changes in the taxation system, Bastos claims that it is necessary to make a deeper assessment, which goes beyond the automotive sector.

Questioned about the entry of GWM and BYD into Anfavea, Márcio de Lima Leite explains that there are some obstacles.

“Anfavea has already started talks with GWM and BYD, but considers that it is not yet the time for them to become associated. The association defends the 35% rate and the quota regime for imports.”

When talking about quotas, again the speech made by the entity that represents the automakers refers to the past. After defining the Inovar-Auto program, the import of up to 4,800 units was stipulated without charging the increased IPI in case the company joined the national production incentive program.

However, one of Anfavea’s concerns is not to create a project that looks like what was established in the Dilma Rousseff (PT) government. That is why the environmental bias, which will have more strength in the second phase of Rota 2030, is placed at the heart of the conversations.