IPI Verde favors ethanol and harms Chinese automaker – 02/17/2024 – Eduardo Sodré

About to be published, the regulations for the Mover (Green Mobility) program contain points that contradict automakers and importers of hybrid and electric cars. The issues are related to IPI Verde, the new way of charging the Tax on Industrialized Products.

A Sheet had access to the proposal that should be included in the program. The information shows that gasoline hybrid cars will have to pay higher taxes than conventional flex models (without any type of electrification).

Flex hybrid models may pay less tax than 100% electric cars — a measure that, initially, benefits Toyota. The Japanese brand is the only one that has this option: the Hybrid versions of the Corolla line, in sedan and Cross body styles.

The publication is expected for this week, and there are automakers holding the investment announcement until shortly after the announcement, which will be made by the Mdic (Ministry of Development, Industry, Commerce and Services), a department under the responsibility of vice-president Geraldo Alckmin ( PSB).

One of them is Toyota itself, which plans an additional contribution to that announced in April 2023 (R$ 1.7 billion). In a statement, the automaker states that it does not comment on future plans.

The Stellantis group is also awaiting the rules to announce a new investment cycle in Brazil. In August, the company confirmed that its first flex hybrid cars will hit the market this year.

The tax rules established in the Mover program will favor cars that can run on ethanol in any configuration — even if they are less efficient than gasoline models.

The project makes sense because it is a renewable fuel, but discrepancies in relation to some models are of particular concern to Chinese automakers.

BYD and GWM, which will begin production in Brazil between the end of 2024 and the beginning of 2025, do not yet offer models capable of running on ethanol, therefore they will become less competitive compared to companies that already produce in the country. Furthermore, the new taxation rules are in addition to the gradual resumption of Import Tax.

Another point that is being questioned is taxation based on engine power. For example: a highly energy-efficient car with 200 hp will be subject to a higher tax rate than a model in the same category with 150 hp.

Ricardo Bastos, president of ABVE (Brazilian Electric Vehicle Association), has criticized the choices made by the Luiz Inácio Lula da Silva (PT) government when defining the Mover rules. “It is not Green IPI, there is no transformation. It is very clear that the plan serves specific interests.”

The executive says that, by including power data among the determining factors for taxation, the industry goes back in time.

“The discussion is no longer about power, but about efficiency and autonomy. It’s about returning to the beginning of the 1990s, repeating what happened with the 1.0 car, which set the industry in motion”, says Bastos.

If the table presented to automakers is maintained, full gasoline hybrid cars — such as the Honda Civic or Kia Niro — will be subject to a tax rate that could vary from 10.5% to 17.5%, depending on the assessment standards established by the IPI Green.

With the regulations in force today, the tax has an average value ranging between 7% and 10%, according to ABVE.

A conventional flex car may have a tariff starting at 3%. In this case, the maximum rate will be 6%.

If the model is a flex hybrid, like the available versions of the Corolla, the IPI may be zero or reach a ceiling of 1%. In the case of 100% electric models, taxation may reach 6%, with the possibility of exemption for models that comply with the new rules.

Diesel pickup trucks will also benefit: the expected rate varies from 3.6% to 10.1%, being lower than previously practiced, when it could reach 19%.

Bastos believes that some numbers should change, especially those related to gasoline hybrid cars. According to the president of ABVE, the Mdic saw that there is a distortion in this part of the rates.

The folder does not provide information on the criteria that will be adopted, but confirms the points that will be part of the evaluations: fuel, consumption, power, vehicle safety and recyclability.

In addition to the automakers involved, sectors related to electric mobility await the regulation of the Mover program.

“The lack of clarity in taxation is the handbrake so that investments in charging stations are still timid and in the free model, without the speed that electric car drivers deserve”, says Danilo Guastaplagia, CEO of Go Electric —a company from the Orbitec group, which offers solutions for vehicle charging.

“The big question is what tax should be levied on the sale of recharges for electric vehicles, if the ISS [Imposto Sobre Serviços de Qualquer Natureza] or the ICMS [Imposto sobre Circulação de Mercadorias e Serviços].”

Discover the types of electrified cars available on the market

BEV (Battery Electric Vehicle) – These are cars powered solely by electricity. They have plugs for quick recharging, which may be different depending on the standard used by the model’s country of origin. The most common is the one suitable for CCS sockets, commonly used in European and American brand cars – except Tesla, which has its own system.

PHEV (Plug-in Hybrid Electric Vehicle) – the acronym refers to hybrid vehicles that have an external plug for recharging, in addition to the possibility of using gasoline — or ethanol, if it is flex fuel. It is possible to select electric mode and, depending on the capacity of the batteries, drive for between 30 km and 150 km without burning fuel.

HEV (Hybrid Electric Vehicle) – These are full hybrids, such as the Toyota Corolla Hybrid Flex, Honda Civic e:HEV and Kia Niro. Each of these cars has its own system, the objective of which is to manage the electric and combustion engines to choose the most efficient way to drive.

MHEV (Mild Hybrid Electric Vehicle) – These are called mild hybrids. In this case, electricity helps reduce fuel burning when starting and provides extra torque when starting off, among other resources.

Understand the Move program

• Published on December 30, Mover (Green Mobility) brings together energy efficiency rules for the automotive industry. It is the continuation of the Rota 2030 program.

• The goal is to reduce carbon emissions by 50% by 2030. As a result, cars will have to become more economical and less polluting

• There are also requirements linked to increasing the safety of new vehicles.

• One of the concepts adopted in this first phase is measuring from well to wheel. This rule favors cars powered by ethanol, which absorb CO2 in the sugarcane cultivation process.

• From 2027, the “cradle to grave” criterion will be adopted, checking the carbon footprints of components at all stages of production and vehicle disposal.

• Companies that join the program will have access to R$19.3 billion in financial credits distributed as follows: R$3.5 billion in 2024, R$3.8 billion in 2025, R$3.9 billion in 2026, R R$4 billion in 2027 and R$4.1 billion in 2028.