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Car Prices in Brazil Have Already Risen Well Above Inflation in Recent Years and May Accelerate Even More. According to Tiago Nigro, Factors Such as Increased Use of Steel, Changes in IPI, and International Tariffs May Cause New Adjustments in the National Automotive Market.
Car prices in Brazil may enter a new phase of increase in the coming months, according to an analysis presented by Tiago Nigro. For him, there is a combination of factors pushing values upward, even after years of continuous increases since the pandemic.
In 2016, for example, a brand new Fiat Mobi cost R$ 31,900. Today, the same model starts at R$ 79,060, a rise of 148%, while the IPCA over the period was 63%. This indicates that automobiles have risen far above the average of the economy.
Greater Weight and More Steel Increase Vehicle Costs
One of the main reasons pointed out is the increased weight of cars, which requires more steel and technological components. The Fiat Uno, for example, went from 765 kg in the year 2000 to over 1 ton in 2020. This increase of about 265 kg raises production costs.
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According to Nigro, this occurs because governments have increasingly required more safety equipment. Since 2014, dual airbags and ABS brakes have been mandatory in Brazil.
In 2020, electronic stability control became mandatory. In 2021, daytime running lights became compulsory, and the European Union included an additional 11 safety systems in 2022.
To support this array of equipment, automakers reinforce the structure of vehicles by incorporating more automotive steel—material that is much more expensive than regular steel.
While regular steel costs about R$ 9 per kg, automotive steel varies between R$ 9 and R$ 35. Thus, just the additional 265 kg can represent R$ 6,625 more in the final price.
Moreover, from 2000 to 2020, the price of steel tripled, rising from R$ 200 to R$ 600 per ton. With more devices, more steel, and a more expensive input, vehicles have become heavier and much more expensive for consumers.
Changes in IPI May Alter Market Values
Another factor that may pressure prices is the recent decree from President Lula, which provides for a zero IPI rate for some cars until 2026. The IPI, a tax levied on the production of manufactured goods, represents about 6.3% of the car’s value.
The reduction, however, depends on criteria. Electric cars receive a 2% discount. Flex fuel vehicles remain unchanged. Gasoline and diesel cars will see an increase—from 6.5% and from 12% to 18%, respectively.
Criteria such as energy efficiency, power below 115.5 horsepower, the presence of safety technologies, and the recyclability of components are also taken into account.
Despite this, 76.2% of the Brazilian fleet is flex fuel and will not undergo changes, while 11.5% is gasoline and 11.7% is diesel, which will see increases. As a result, many vehicles may become more expensive, while few will actually decrease in price.
Nigro also raises the question of whether the potential discounts would be passed on to consumers.
For him, automakers may prefer to incorporate this reduction as profit margin, keeping prices stable. Consequently, used and imported cars tend to become more expensive.
International Tariffs Affect Steel and Imported Cars
The third reason cited is the tariffs imposed by Donald Trump on foreign vehicles sold in the United States, the so-called “tariff.” This measure is expected to increase car prices in the American market and lead automakers to redirect excess production to other countries, such as Brazil.
Initially, this may increase the supply of cars in the country, but with embedded tariffs, which should raise prices in the medium term. Moreover, new cars use more steel, and Brazil is one of the countries with the highest tariffs on the product.
Brazil exports 48% of its steel to the United States, paying tariffs, and then imports cars made from that steel back, now with even higher tariffs. This cycle causes the cost of steel to rise and automakers to pass the increase onto vehicles.
When new cars become more expensive, the demand for used cars increases. With higher demand, used car prices also rise, fueling the upward cycle in the automotive sector.
Partial Relief, But Pressure Should Continue
Recently, it was announced that manufactured steel and aluminum products from Brazil will see a reduction in the import duty from 50% to 25% in the United States. This change may alleviate some of the pressure on costs.
Even so, there are still tariffs that did not exist before. For Nigro, this continues to drive vehicle prices, maintaining the upward trend in the Brazilian automotive market.
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