Electric car: government must end tax exemption – 05/09/2023 – Market

The federal government should publish this month a measure that makes the rules for pollutant emissions by new vehicles sold in the country more restrictive and also the end of the zero rate of import tax on electric models over the next three years, said the president of the association. automakers, Anfavea, this Tuesday (5).

Sales of electrified cars (hybrid and fully electric) have jumped in recent months, with the accumulated total from January to the beginning of this month surpassing the entire volume of 49,200 units in 2022, according to data from the entity.

The advancement of the segment has bothered traditional automakers already installed in the country, which in recent years have chosen to focus their sales on combustion models, which are currently protected by a 35% import tax rate.

The tax exemption on trams was adopted about five years ago and at the time the federal government did not define whether it would be permanent or with a deadline to end.

Mentioning an “invasion of Asian products, mainly from China” in Latin America, a region traditionally the focus of vehicle exports from Brazil, the president of Anfavea, Márcio Leite, told journalists that “he has nothing against Chinese, Asians”, but that the sector in the country defends the return of the 35% tax protection on electrified vehicles.

The executive mentioned that the participation of vehicles from China in imports by Latin America, excluding Brazil, between 2012 and 2022 grew from 4.6% to 21.2%, which made the Asian country leader in purchases in the region.

Also according to Leite, Brazil failed to collect around R$ 2 billion this year due to the exemption from import tax on electric vehicles, of which R$ 1.1 billion is related to vehicles imported from China.

“It is a threat, yes (for the internal market). We have been talking to the government. We need a transition and predictability rule”, said the president of Anfavea in an event about the sector’s numbers in August.

Currently, among the main Chinese vehicle brands in Brazil are GWM, which is finalizing a factory to start production in 2024, and BYD, which has been negotiating with the government of Bahia for months about the installation of a factory in the state.

Earlier, GWM said it sold 1,452 units of the Haval hybrid utility vehicle in August, currently its only model sold in Brazil, the brand’s highest sales volume in the country since April, when sales began. The market as a whole recorded sales of 8,184 hybrid vehicles last month and 1,167 electric vehicles, according to data from Anfavea.

According to Leite, the end of the import tax exemption for electric cars will take place over three years and should be announced close to the provisional measure that will bring the general objectives of the second phase of the Rota 2030 automotive policy, scheduled for this month.

“We have a meeting on September 11 at the Ministry of Development. The forecast is that in September it will be published [a nova fase do Rota 2030]“, said Leite.

The executive, from the Stellantis group, mentioned without mentioning names that among Anfavea’s concerns are companies that “invest to assemble 100,000 vehicles, but will bring (import) 500,000”. Traditionally, the plan of new brands that are installed in the country is to start operations via imports, for a second moment, when they achieve scale, to build factories with initial capacities for around 100 thousand units.

Sought after, GWM, which announced investments of BRL 6 billion in Brazil by 2025, and BYD, which plans to invest BRL 3 billion over five years, could not immediately comment on the matter.

Regarding Rota 2030, the new phase should maintain the logic of the beginning of the program: to give a reduction of one to two points in the IPI (Tax on Industrialized Products) for automakers that manage to overcome levels of efficiency in fuel consumption and emission of pollutants, measuring the entire fuel use cycle for this purpose, affirmed Anfavea representatives. Automakers that do not meet the updated minimum percentages will have to pay fines.

trucks

In addition to the defense of commercial protection, Anfavea also has as a priority the approval in Congress of the provisional measure that granted benefits for the sale of trucks and buses. But in this case, the prospects for approval by Congress are not positive. The MP expires on October 3 and, if that happens, the amount of resources of R$ 700 million cannot be used in full.

“The day before yesterday I spoke with vice-president Alckmin and he was very committed to make it happen (the approval of the MP in Congress), but he also agreed that the agenda of Congress is tight”, said the president of Anfavea.

“There is still R$ 700 million that can be used to sell trucks, but they have to be used this month… We are working with the possibility that Congress will not be able to approve this MP”, said Leite.

The truck segment has suffered from low demand, affected since the beginning of the year by a movement of anticipation of purchases in 2022 generated by the change in pollutant emission technology, which forces vehicles to be cleaner, but which makes them more expensive.

From January to the end of August, truck sales accumulate a 14% drop over the same period last year. In August, according to Anfavea, 35% of sales of new trucks were models produced this year, with the new Euro 6 technology. Historically, the percentage should be closer to 66%, according to the entity.

Market

In August, the country’s automakers had growth of 24% in production compared to July, assembling 227 thousand cars, light commercial vehicles, trucks and buses, but sales in the same comparison retreated 7.9%, to 207.7 thousand vehicles, according to the Anfavea.

Against August of last year, production fell 4.6%, accumulating 1.54 million units in the year, 0.4% less than the volume assembled in the same period of 2022.

Already sales in the monthly comparison retreated 0.4%, and in the year the sector registers advance of 9.4%, to 1.43 million vehicles.

The president of Anfavea stated that the month for production was “very good”, with no automaker with a factory stopped, different from previous months in which situations including lack of parts and weak demand pressured sales and generated an increase in inventories.

“We were practically the same as in May (in sales), which was the month that preceded the federal government’s incentive plan for vehicles worth up to R$ 120,000,” he added.

Exports of vehicles assembled in August compared to the same month last year fell 26.2%, to 34.5 thousand vehicles, according to data from Anfavea. In the year, the sector accumulates foreign sales of 292.1 thousand units, down 12.8% over the same period in 2022.

“The most worrying data is how Brazil is losing market in our backyard. The bulk of our exports go to Latin America and what we are seeing is that these countries are receiving Asian products, mainly Chinese, in volume far above what was history,” said Leite.