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1.0 Car Category Gains Strength in the National Market After IPI Exemption, Discounts from Automakers, and Stricter Environmental Rules Stimulating Manufacturers and Consumers. Program Boosts Sales and Renews Scenario of the Automotive Sector.
The 1.0 category of flex engine cars, with power of up to 115 horsepower and national manufacturing, recorded a significant increase in sales in July 2025, driven by the new Sustainable Car program, which eliminates the Tax on Industrialized Products (IPI) for vehicles that meet technical and environmental criteria.
According to the National Federation of Motor Vehicle Distribution (Fenabrave), sales of these models grew 13% compared to June of this year.
In comparison to the same period in 2024, the increase was 11.4%, highlighting the immediate impact of the initiative on the Brazilian automotive market.
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The president of Fenabrave, Arcélio Alceu dos Santos Junior, presented the results to the Vice President of the Republic and Minister of Development, Industry, Commerce and Services (MDIC), Geraldo Alckmin, during an official meeting in Brasília on August 2.
At the time, Alckmin highlighted the importance of the fiscal incentive: “The program is a success […], and automakers helped with a good discount”, the minister stated during a visit to dealerships in the federal capital.
In addition to the eliminated IPI, some manufacturers applied their own discounts, further reducing the price of 1.0 vehicles for the end consumer.
Sustainable Car Boosts Sales and Broadens Access
The performance data of the sector reinforce the effect of the policy.
According to the consulting firm K.Lume, the Brazilian market registered 229,397 new cars in July 2025, compared to 202,164 registered in June.
The 1.0 automobiles, being the most affordable in the segment, were responsible for a large part of this growth, establishing themselves as the main entry point for the public seeking their first brand new vehicle or to renew their fleet at a lower cost.
Criteria for Participation in the Sustainable Car Program
To be part of the Sustainable Car program, the vehicle must be produced in Brazil, have a low-emission flex engine, a maximum power of 115.5 horsepower, meet weight limits, have a high recyclability index, and comply with structural safety requirements.
With these requirements, the government’s goal is to stimulate the supply of more efficient and accessible vehicles, reversing a recent trend where the market practically stopped offering options below R$ 80,000.
Prior to the initiative, the cheapest available models, such as Fiat Mobi and Renault Kwid, had already exceeded this price range, making it difficult for lower-income families to access a new car.
Brands That Joined the Automotive Incentive Program
Four brands were the first to officially join the program: Fiat, Hyundai, Renault, and Volkswagen.
These companies registered eligible models with the federal government, enabling the application of the eliminated IPI.
It is up to each manufacturer to register their vehicles, and the final prices depend on the additional discounts granted by each automaker, as well as the tax exemption provided by the State.
The target audience includes both individuals and legal entities, benefiting fleet operators and vehicle rental companies, thus broadening the reach of the public policy.
How the Green IPI and Environmental Taxation Work
To compensate for the reduction in revenue resulting from the new benefit, the federal government implemented the Green IPI, a surcharge directed at vehicles considered more polluting.
This measure is part of the Green Mobility and Innovation Program (Mover), which introduces stricter criteria for environmental assessment and energy efficiency.
The scoring of vehicles now takes into account not only the engine power and the pollutants emitted but also a set of factors related to the environmental impact of each model.
The better the classification, the lower the taxation.
This change affects both vehicles produced in Brazil and imported ones, making the system fairer and aligned with environmental goals.
Recent History of Incentives to the Automotive Sector
This is the first major incentive policy for the sector since 2023 when the provisional measure was approved that released R$ 1.5 billion in tax credits for manufacturers, of which R$ 500 million were allocated exclusively to automobiles.
The impact of the measure from two years ago is still felt in the market: in 2023, the price of popular cars fell by between R$ 2,000 and R$ 10,000, depending on the model and the discount granted by each manufacturer.
To balance public accounts, the government chose to reimpose taxes on diesel, ensuring resources for the execution of the incentives to the automotive sector.
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