Chinese automakers take advantage of fights at Anfavea to get closer to the government – 09/27/2023 – Market

On the eve of the publication of a new incentive program for the automotive sector, vehicle manufacturers have made disjointed movements. The divisions within Anfavea (association of automakers) opened space for Chinese manufacturers, who are not part of the entity, to present their proposals to the government.

The lack of consensus could delay the release of the new plan – which, once again, should be based on tax benefits to encourage local manufacturing. Energy efficiency will be the basis, with an emphasis on the use of ethanol and electrification.

Anfavea hopes that the second stage of the Rota 2030 program – which should be called Green Mobility – will include the gradual return of the Import Tax.

In his last presentation of data on production and sales, the president of the association, Márcio de Lima Leite, defended the return of import tax (35%) on electrified vehicles and the establishment of quotas for the arrival of these cars in the country. The main target is Chinese brands.

Another point raised is a new fee based on environmental rules. This issue, which was not voted on by the entity, seeks to limit the entry of manufactured goods from countries that have more permissive environmental legislation than Brazilian standards.

The entity says that Brazil failed to collect around R$2 billion this year due to the exemption from Import Tax on electric vehicles. Of this total, R$1.1 billion relates to vehicles imported from China.

Engineer Cassio Pagliarini, who is a partner at the consultancy Bright, believes that the possible return of the import tax will progress slowly. “No one will be able to settle here if there is a high tax.”

Pagliarini recalls that it is not possible to present a national electric car in the short term, so imports must remain viable so that the technology can become widespread and the charging infrastructure can be improved.

The idea appeals to automakers that bring few “green” vehicles to Brazil and plan to invest in the national production of flex hybrid models or even those powered solely by electricity. These include Volkswagen and the Stellantis group, which brings together the brands Fiat, Jeep, Citroën, Peugeot and RAM.

But these companies do not share the same table. Due to the dispute involving the maintenance of tax benefits in the Northeast region, GM, Volkswagen and Toyota began a crusade that included dossiers and frequent visits to the Ministries of Finance and Development.

The target of the complaints is the Stellantis group – which produces Fiat Jeep and RAM vehicles in the city of Goiana –, and the themes are mixed there. In addition to being president of Anfavea, Marcio de Lima Leite is the automaker’s senior vice president of institutional relations and legal in South America.

At the association’s last press conference, on September 5, Leite pointed to photos of former presidents and defended himself against statements made behind the scenes by some of the entity’s members.

“In that gallery there are 19 presidents of Anfavea, and I am the twentieth. Regional benefits, Sudam, Sudene, any type of incentive were never discussed here. We have basic pillars in the association, and one of them is producing in Brazil. But where will we produce in Brazil, it is not the responsibility of Anfavea.

“None of these presidents took a position on regional issues, and now, equally, I do the same.”

The public raids that made negotiations with the government difficult are unprecedented. “There has never been a split like this, until ABVE [Associação Brasileira do Veículo Elétrico] better understood”, says Cassio Pagliarini, who has worked in the automotive sector since 1980.

While Anfavea members disagree, Chinese automakers are trying to get closer to the government. About ten days ago, representatives of the brand met with Geraldo Alckmin, vice-president of the Republic and minister of Development, Industry, Commerce and Services. The executives presented proposals for the new industry incentive program.

The meeting, therefore, took place a week before GM, Toyota and Volkswagen’s agendas with the Minister of Finance, Fernando Haddad.

Going to one ministry or another is also a sign of disagreement. Automakers have complained about the lack of coordination between departments since the announcement of the program that temporarily reduced the price of new vehicles for sale in the national market.

An example is what happens with discussions on energy transition, the central theme of the new program. Although the industry is under the responsibility of Alckmin, it is the Treasury that takes care of the most important issue when it comes to the viability of electric cars.

A sector executive defined the situation as a tangle of initiatives that are not discussed. In this aspect, the disputes within Anfavea have not helped to unite the ends, as there is a lack of consensus among the members. Meanwhile, the Chinese advance.

In a statement, GWM said it “supports the government’s strategy of not limiting itself to discussing whether or not to change the import tariff for electric vehicles.” “We believe that the government will present a robust program, capable of promoting a true reindustrialization of the Brazilian automotive sector,” said Ricardo Bastos, director of Institutional Affairs at GWM. Although the plan is not that robust, the speech seeks to strengthen the relationship with Brasília.

“GWM understands that the time has not yet come to discuss the review of import tax rates, as these volumes are still very low”, says the note sent by the Chinese automaker. “For Brazilian consumers to have access to new technologies, it is important not to discourage the growth of the electrified vehicle market.”

The company has invested in themes that appeal to both the federal and São Paulo governments. The Iracemápolis factory (interior of SP) is receiving an investment of R$10 billion and, in addition to the production of passenger cars and light commercial vehicles, there is a strategy aimed at producing heavy vehicles fueled with green hydrogen.

BYD is even more aggressive in its strategy of approaching different spheres of power. Not by chance, he created a position of advisor for Alexandre Baldy, who was Minister of Cities under Michel Temer.

Before Baldy, the automaker had Eduardo Paes, current mayor of Rio, among its executives.

Next month, the Chinese company is expected to announce its definitive plans for production in Bahia. Ford reverted ownership of its industrial complex in Camaçari to the state, stating that the process will occur through reimbursement for investments made in the area. The space is expected to house the Chinese factory.

Although there is a joint effort to prevent the return of the import tax, BYD and GWM have a direct fight in the segment of compact electric vehicles. The Dolphin and Ora 3 models, which cost R$150,000, want to be the best seller in the category. But it’s an old-fashioned dispute, without the intrigues between Anfavea’s members.