Government wants to announce on the 25th measure to make popular cars cheaper; see plans under study

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President Lula stated at an event in early May that a price of R$90,000 is ‘not popular’. This week, the government spoke with automakers to design alternatives. The federal government wants to announce on May 25, Industry Day, a measure to make popular cars cheaper. In recent days, representatives of ministries and the sector discussed possible alternatives to reduce prices. The intention to make popular cars cheaper was publicly manifested by President Luiz Inácio Lula da Silva during a speech on May 4th. At the time, Lula said that “R$90,000 is not popular”. At the beginning of the week, representatives of the automakers met with the vice-president and Minister of Industry, Geraldo Alckmin. Government and companies discussed some options, still without reaching a final format. The executives stressed to the government that automakers already have very little profit margin on popular cars and that, therefore, it would be difficult to reduce prices at the factories. The margin, according to the companies, are higher in more expensive cars. Alckmin has already signaled that the package should also include support measures for the truck industry. ‘R$ 90,000 car is not popular, it’s for the middle class’, says Lula 10% or 15%, for example. And use that value to exchange the used car for a new one. This could be done via a provisional measure, if there is consensus within the government. Taxes An eventual tax reduction was also discussed. At the meeting between the government and automakers, it was highlighted that the Industrialized Product Tax (IPI) — a federal tax — is already reduced for popular cars. For a tax cut to be effective, the measures would need to involve taxes collected by the states, such as ICMS. The ICMS rate is already reduced for passenger cars and any drop in collection would need to be compensated by the Union. This would go through negotiation with the state Treasury departments.

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