To make popular cars cheaper, the government can reduce taxes for the industry
The government spent Wednesday (24) talking to the automotive sector to finalize the package of measures that aim to make popular cars cheaper. The announcement is scheduled for this Thursday, Industry Day, at 10am. Sources who participated in the conversations say that the idea of the Planalto and the Ministry of Industry is to carry out a tax reduction for the segment. The cut in the IPI rate was already given as practically certain by interlocutors participating in the negotiations, but the sector was trying, until this Wednesday night, to also include the PIS and Cofins in the reduction forecasts. That’s because the IPI already has reduced rates for cheaper cars. Therefore, a cut in this tax would not have such an effect on the final price. Special lines of credit, offered by public banks, were also on the discussion table. This Wednesday, after a meeting with the Minister of Finance, Fernando Haddad, the president of Stellantis, Antonio Filosa, stated that the sector is suffering from high interest rates. The company controls Fiat, Jeep and Citroen, among others, with a 33% share in the domestic market. “Interest is difficult to resolve from one day to the next. But it is possible to think of credit access mechanisms that could facilitate it. For example, improving the level of real guarantees, using some assets that the government has, and so on “, declared the Stellantis executive. Popular car price more than quintupled ‘R$ 90,000 car is not popular, it’s for the middle class’, says Lula Currently, the cheapest brand new cars in the country have a starting price of around R$ 68,000. The intention to make vehicles cheaper was publicly manifested by President Lula during a speech on May 4th. At the time, he said that a “R$90,000” car is not popular. A study by the consulting firm Jato do Brasil points out that the price of popular cars has more than quintupled in 23 years, rising from R$12,500 in January 2000 to R$68,200 in the same month of 2023. Among the factors justifying the increase are the safety requirements and the technological advances of recent years, which have made cars more sophisticated; the lack of components and semiconductors generated by the pandemic; the war between Russia and Ukraine, which made raw materials more expensive; in addition to the rise in the dollar and freight. Possibility of MP The idea, according to government sources participating in the discussions, is that the actions are made possible through a provisional measure, which takes effect as soon as it is edited. In a statement, the Planalto Palace made it clear that the measures will have an effect in the “short term” and that “they seek to expand the population’s access to new vehicles, in addition to leveraging the production chain linked to the sector”. Last week, the Minister of Industry and Vice President, Geraldo Alckmin, signaled that the measures should also cover the segment of trucks. Fiscal effect While the Ministry of Industry was drawing up the measures, technicians from the Treasury were evaluating how to compensate for the fall in revenue that would be caused by the new exemption. One of the possibilities on the table, still under debate, would be to use charging for sports betting – which still needs to be regulated – as a compensatory measure.