Thousands of Chinese EVs Clog Up Brazil’s Ports in Slowdown
Brazilian ports have been clogged this year with upwards of 70,000 unsold Chinese EVs, in a sign of how hard it’s becoming for China’s automakers to keep up their robust growth.
(Bloomberg) -- Brazilian ports have been clogged this year with upwards of 70,000 unsold Chinese EVs, in a sign of how hard it’s becoming for China’s automakers to keep up their robust growth.
Companies such as BYD Co. and Great Wall Motor Co. have global ambitions, and Brazil has become a crucial proving ground with many other large economies turning toward protectionism. The country is the world’s sixth-biggest auto market and success there may boost prospects across the region.
But after taking Brazil’s nascent EV sector by storm, China’s automakers are facing increasing challenges. The glut of cars at the ports stems from them trying to avoid new tariffs. Domestic competitors have responded with additional electric options and investment. And EV growth rates in the country are slowing.
The “honeymoon is over now,” said Alexander Seitz, executive chairman of the South American unit of Volkswagen AG, which has been selling cars in Brazil since the 1950s and produces some of the country’s top-selling combustion-engine models.
BYD is on pace to surpass $100 billion in sales this year, and Brazil is a big part of that. It’s the company’s largest overseas market by a wide margin, as it faces pushback from governments in the US and Europe.
Last decade, Brazil made EVs and hybrids exempt from a 35% import tax on vehicles in a bid to jump start the sector. That attracted China’s automakers, and they essentially created the market for them in a country with more than 200 million people. The established local manufacturers – all subsidiaries of global companies like General Motors Co. – had largely ignored electric and hybrid models.
BYD introduced its first cars to Brazil in 2021 and accelerated exports last year. With its lowest-cost model at just 115,800 reais ($19,100), the company quickly gained market share by being cheaper than the competition’s gas-powered vehicles. Domestic manufacturers responded by reducing prices on some models by as much as 30%.
Brazil’s automakers lobbied to bring back the import taxes and eventually found support in President Luiz Inacio Lula da Silva, who returned to power in January 2023. Lula’s government began reinstating the levies a year later at 10% with plans to gradually hike them to 35% by the middle of 2026. (The domestic industry is already pushing to speed that up.)
In response, BYD flooded Brazil with vehicles ahead of the tariffs. In early November, a company executive said it had 35,000 cars remaining at the ports, accounting for roughly four months of inventory. Alexandre Baldy, a senior vice president for BYD’s Brazil division, said that was all part of a plan to get ahead of the tariffs to maintain prices and push back against what he called an “outdated” domestic industry.
“We have shaken up the Brazilian automotive market to the point of instilling so much fear in our competitors,” Baldy said in an interview. “It’s the complete desperation of the competition.”
The share of electrified powertrains in Brazil’s total car sales almost doubled to 7% in January from a year earlier, but has remained roughly at that level since, according to carmakers’ association Anfavea. Through October, car companies sold about 2 million vehicles and roughly 140,000 were electrified units.
Finding new customers willing to buy an EV in a country that’s just starting to build charging stations is becoming more difficult. Adding to the worry about how far an electric car can go on a single charge is that Brazil is a large country with big distances between population centers.
“We need to expand our infrastructure,” said Ricardo Bastos, Great Wall Motor’s government relations director in Brazil. “Sales are good today, but they have the potential to grow even more if our infrastructure keeps up.”
To speed up adoption, BYD and Great Wall Motor are getting more aggressive heading into 2025. They are both planning to open factories in Brazil.
For BYD, that’s expected to come in March when its first electric car plant outside Asia is slated to begin producing cars. On the site of a former Ford Motor Co. facility, BYD is investing 5.5 billion reais ($1.1 billion) and expects that in two years the plant will be churning out 300,000 cars annually.
BYD also said it was doubling the number of dealers it has in the country. They’ll promote a fleet with about a dozen models. That includes what the company says is the market’s first hybrid pickup truck, which debuted in October.
Meanwhile Great Wall Motor, which is projected to surpass $28 billion in sales this year, expects to start operating in May at a former Daimler plant, part of a plan to invest 10 billion reais ($1.6 billion) over roughly a decade.
Other Chinese companies have also recently announced plans to expand to Brazil, amid a wave of strong tax barriers in Europe and the US. Earlier this year, the Biden administration raised tariffs on Chinese-imported EVs to 100% from 25% to shield the US auto industry from what it claimed were unfair trade practices.
Omoda and Jaecoo, brands owned by Chery Automotive Co., plan to launch several models in Brazil by 2026. GAC promises to invest about 6 billion reais ($1 billion). NETA, linked to the Hozon New Energy Automobile group, is currently entering the market. And Zeekr, from Geely Automotive Holdings, recently began presenting premium models in the country.
“The Chinese will try to conquer this country from an automotive standpoint, and we have to see how to deal with that,” Seitz said. “At the end of the day, competition is always good, it forces us to reconsider things.”
Established players, including Volkswagen, Toyota Motor Co. and Renault SA, have announced more than 100 billion reais ($20 billion) in investments by the end of this decade. Most of the cash is planned to develop hybrids, including flex solutions that combine electricity with a combustion engine powered by gasoline and ethanol, a fuel produced locally from Brazil’s sugar cane crops.
Stellantis, owner of traditional brands such as Fiat, Jeep and Peugeot, is planning to start selling EV models from its Chinese partner Leapmotor in Brazil early next year.
Before the introduction of the new taxes on imported electrified vehicles, the Chinese didn’t “play under the same conditions,” said Emanuele Cappellano, chief operating officer of Stellantis in South America.
Like the rest of Brazil’s domestic auto industry, Cappellano is betting that will help even the playing field.
--With assistance from Giovanna Serafim.
More stories like this are available on bloomberg.com
©2024 Bloomberg L.P.
Catch all the Business News , Corporate news , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
MoreLess
First Published:12 Dec 2024, 03:56 PM IST
- Top Gainers
- Top Losers
- 52 Week High