The only defense, according to the auto industry, is higher tariffs on Chinese imports.
Part of the problem is that Brazil kept its tariffs on Chinese imports low, while most other customers for Chinese EVs raised theirs to double digits. Europe slapped a 38-percent tariff on Chinese EVs last July, specifically to deal with Chinese product dumping. President Donald Trump raised U.S. tariffs on Chinese vehicles to 100 percent in April.
Brazil’s tariff on EVs was zero from 2015 to 2024, when it was raised to a modest ten percent. When Chinese auto giants like BYD looked for markets to dump the excessive inventory of government-subsidized cars they manufacture with suspiciously cheap labor, Brazil was one of the few large markets that remained readily accessible.
Reuters reported on Thursday that Chinese vehicle imports to Brazil are expected to surge by 40 percent this year, accounting for nearly eight percent of light vehicle registrations. At least 80 percent of Brazil’s electric vehicles are Chinese imports, and some estimates say it is closer to 90 percent. Some of the biggest cargo ships in the world are ferrying Chinese cars to Brazil. When the Brazilian government announced programs to pump up EV sales, BYD had a vast inventory ready to go.
Brazil wanted importers to build local factories for their electric vehicles, and BYD pledged to do so, announcing plans in 2023 to renovate an old Ford plant. However, Brazil stopped issuing work visas to BYD in December following allegations that Chinese workers brought in to work on the Brazilian plant were being treated like slaves.
Work on the BYD EV plant has been delayed for at least 18 months, and Brazilian officials began to suspect other Chinese projects in their country could be using slavery. Meanwhile, the tidal wave of cheap imports from BYD, GWM, and other Chinese firms keeps coming.
“We support the arrival of new brands in Brazil to produce, promote the components sector, create jobs and bring new technologies. But from the moment that an excess of imports causes lower investment in production in Brazil, that worries us,” Brazilian auto association head Igor Calvet told Reuters.
The Brazilian government belatedly announced plans to raise tariffs on Chinese cars in slow increments, climbing every six months until they reach 35 percent sometime in 2026, but auto executives and labor officials are lobbying the government to increase the tariffs faster to afford quicker protection.
BYD is not waiting around for the hammer to fall. The company shipped 7,300 EVs to Brazil in May and is rushing to prepare more huge shipments while tariffs are still low. Critics accused China of gaming a system that was supposed to boost manufacturing and create jobs in Brazil, and faulted their own government for setting up a system that retrospectively seemed tailor-made to shower benefits on Chinese companies with gigantic inventories of ready-made vehicles while Brazil’s EV industry is struggling to get off the ground.
Unfortunately, the new proposal to accelerate tariffs is also working to the advantage of Chinese companies, as Brazilian consumers rush to buy Chinese cars at cut-rate prices before trade barriers go up. Retail sales of imported cars rose by 18.7 percent in the first quarter of 2025, while domestic sales ticked up by only 0.2 percent. EVs are generally selling much better in Latin America than North America, and most of that sales growth is going to Chinese brands.
“Brazil is at a crossroads. Either it positions itself as a key actor in the emergent supply chains for electromobility and clean energy – generating jobs, innovation, and technological sovereignty – or it limits itself to import technologies, losing opportunity in a new global industrial cycle,” University of Campinas electromobility researcher Edgar Barassa said on Thursday.
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