Brazil to Increase Import Tax on Electric and Hybrid Vehicle Parts

On July 30, Brazil's Trade Commission (Gecex-Camex) announced that it has decided to raise the import tax on electric and hybrid vehicle components ahead of schedule. Starting January 2027, completely or partially disassembled imported vehicles (CKD and SKD) will be subject to a 35% tariff, which is an advance of one and a half years from the previously planned date of July 2028. Currently, the import tax on such goods is 14%. The commission also rejected a request from Chinese automaker BYD to lower the import tariffs on semi-knocked down and completely knocked down vehicles to 10% and 5%, respectively. Semi-knocked down assembly involves partial welding, painting, and pre-assembly overseas, while completely knocked down assembly means importing fully disassembled components for complete assembly in the destination country. Additionally, the Brazilian Foreign Trade Council approved a temporary tax exemption quota of $463 million for semi-knocked down and completely knocked down vehicles, exempting import taxes for six months from the date of publication in the official Brazilian gazette. If this quota is exceeded, manufacturers will need to pay the full tax rate, and the full taxation will resume after the six-month period. Earlier this year, BYD requested the Brazilian government to temporarily lower the import tariffs on completely and semi-knocked down vehicles, which faced opposition from other automakers including Toyota, Volkswagen, General Motors, and Stellantis. Earlier this month, these four companies sent a letter to President Lula, expressing that such a move could jeopardize their investments in Brazil. The letter stated, 'If the tariff reduction is approved, the Brazilian automotive market will be impacted. Lowering tariffs will lead to unemployment, technological dependency, and an overall market imbalance.' Before the commission's decision, BYD criticized these four automakers in a statement, asserting that its Brazilian factory is progressing as planned and arguing that reducing tariffs is reasonable, as assembling semi-knocked down and completely knocked down vehicles locally can create jobs. BYD also claimed that the prices of its vehicles are competitive, unlike those offered by members of the Brazilian Automotive Manufacturers Association (Anfavea).