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Tax cuts have an immediate impact on the prices of Toyota and Ford cars, benefiting local consumers.
A surprising drop in car prices is causing a stir. In the midst of an economic crisis that seemed to have no end, the government took a bold step by reducing the PAIS tax, one of the main taxes levied on vehicles in the country.
This change directly impacted automakers Toyota and Ford, who quickly adjusted their prices, sparking hope for Argentine consumers. But what does this mean for Brazil? Should our country consider a similar measure to ease the burden on Brazilians’ pockets?
At the end of August 2024, Argentina announced a significant reduction in the PAIS tax, which went from 17,5% to 7,5%.
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This tax, instituted in December 2019 by then-President Alberto Fernández and raised by current President Javier Milei in 2023, is levied on imports made with the “official dollar” sold by the Central Bank of Argentina.
The reduction aims to alleviate the automotive sector, both in parts and vehicles, and has already begun to show immediate effects on the market.
Toyota kicks off price cuts
On September 2, the Toyota was the first automaker to respond to the new tax rate, reducing the prices of its vehicles produced in Argentina, such as the Hilux pickup, the SW4 SUV and the Hiace van.
According to Motor1.com Argentina, prices have fallen by an average of 2% for locally manufactured models and 4% for imported ones.. This measure brought relief to consumers looking for popular models such as the Hilux and SW4, which are also imported to Brazil.
For example, the Chassis Cabine version of the Hilux, very popular among Argentines and Brazilians, fell from 29.789.000 pesos (around R$ 175,2) to 29.193.000 pesos (R$ 171,7), a reduction of 596.000 pesos (R$ 3,5).
The more robust GR-Sport version went from 68.812.000 pesos (R$ 404,9 thousand) to 67.436.000 pesos (R$ 396,9 thousand), a drop of 1.376.000 pesos (R$ 8 thousand).
Ford follows Toyota's strategy
Shortly after Toyota's announcement, Ford decided to follow the same strategy, reducing prices across its entire line in Argentina starting September 3.
Among the models that most interest the Brazilian market is the Ranger, whose XL 4×4 version had a significant reduction of 1.281.730 pesos (R$ 7,5 thousand), falling from 42.731.000 pesos (R$ 251,4 thousand) to 41.449.070 pesos (R$ 243,9 thousand).
This fierce competition in the Argentine market is benefiting local consumers, but there is still no evidence that these price reductions will be reflected in Brazil.
Impact on the Brazilian market: should we expect something similar?
The reduction in the PAIS tax and the resulting drop in vehicle prices in Argentina raises an important question: Should Brazil consider a similar measure?
With a tax burden that weighs heavily on consumers' pockets, especially in the automotive sector, the possibility of reducing taxes such as IPI and ICMS could bring relief to those who want to purchase a new vehicle.
However, this possibility seems distant in the current Brazilian economic scenario, which faces fiscal challenges and a volatile market.
What do the experts say?
Economic and tax experts say that a reduction in vehicle taxes in Brazil could stimulate the automotive market, increase sales and generate a positive impact on the economy as a whole.
However, they also warn of the fiscal consequences of a measure of this nature. According to economist José da Silva, a reduction in automotive taxes in Brazil would have to be carefully planned to avoid imbalances in the government budget and negative impacts on other sectors..
Should Brazil follow Argentina's example?
The Argentine government's decision to reduce taxes and the rapid response from automakers Toyota and Ford bring to the fore a relevant debate for Brazil.
With vehicle prices constantly rising in the country, a similar measure could benefit Brazilian consumers and stimulate the market.
But would the Brazilian government be willing to sacrifice part of its revenue to ease the burden of taxes on automobiles? This is a question that certainly deserves discussion.
