Company that provided car to Lula will benefit from tax reduction

Last Wednesday (24), first lady Janja Silva drove, alongside President Luiz Inácio Lula da Silva (PT), the first electric SUV from Chinese BYD. The company, the largest electric car manufacturer in the world, intends to start producing in Brazil later this year.

BYD will enjoy a tax incentive that was extended in the tax reform after much effort from the government. The device that renewed the exemption became known behind the scenes in Congress as the “Lula Amendment”, thanks to the president’s sponsorship.

According to BYD, Janja “approved” the seven-seater Tan model, which starts at R$529,000. The car will be at the disposal of the Presidency of the Republic for one year, loaned. Wanted by People’s GazettePlanalto did not clarify who will use the car and only said that it will not be used on trains.

The objective of the meeting was also to present to the president a detailed report on the investment plan in Brazil, focusing on the construction of the car factory in Camaçari, Bahia, which will begin in the coming weeks. The unit is located in a former Ford plant, which in 2021 closed activities in the country.

The factory will be BYD’s first unit outside Asia, with an investment of approximately R$3 billion. BYD, which has said several times that Brazil is strategic for its global growth, is negotiating the purchase of a lithium mining company in Brazil.

As lithium is an essential metal in battery production, controlling part of the supply chain helps reduce costs, which gives you a competitive advantage. But there are other benefits for BYD in Brazil.

“Lula Amendment” extended tax benefit that BYD will be able to take advantage of

In the tax reform approved in 2023, a device sponsored by the Lula government extended federal tax incentives for automakers located in the Northeast, Center-West and North until 2032. The benefit, which has existed since the late 1990s and was previously extended, would end in 2025.

The sections in favor of automakers already installed or that would be established in these regions were only included in the final version of the proposed amendment to the Constitution (PEC) of the tax reform. They were presented on the date of the vote on the text by the Chamber of Deputies, on July 6th.

According to a report from People’s Gazettea few days earlier, Stella Li, global vice-president and president of BYD in the Americas, was at the Palácio do Planalto with Lula, the vice-president and minister of Development, Geraldo Alckmin, and the governor of Bahia, Jerônimo Rodrigues (PT) .

Rodrigues also sought out deputies to defend the inclusion of the benefit in the final report submitted for analysis by the plenary. The device, however, was overturned by the Chamber soon after, in the vote on a suppressive highlight. Months later, however, it resurfaced during the tax reform process in the Senate, where it was approved. The benefit was maintained in the final version of the reform, enacted by Congress.

The incentive costs around R$5 billion to public coffers per year. However, according to a joint audit by the Federal Court of Auditors (TCU) and the General Comptroller of the Union (CGU), it has a low socioeconomic impact and did not meet the objective of promoting regional development.