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Dispute Among Auto Industry Giants Exposes Divergences Over Tax Incentives and Domestic Production, Leading the Government to Intervene with a Measure That Tries to Balance Competitiveness, Job Creation, and the Advancement of New Technologies in Brazil.
Brazil witnessed an intense confrontation between large traditional automakers and the Chinese BYD, which managed to mobilize the government to try to mediate the clash with a compromise measure.
The tension began when BYD requested the government to reduce the import tax on semi-knocked down (SKD) and completely knocked down (CKD) vehicles, in operation initiated at its unit in the former Ford factory in Camaçari (BA), purchased for R$ 287.8 million.
The request was for SKD to pay 10% and CKD only 5% in tax.
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The automakers Volkswagen, Toyota, Stellantis (which controls brands such as Fiat, Jeep, and Peugeot) and GM responded with a letter to President Lula, stating that such benefits could generate unemployment, imbalance in the trade balance, technological dependency, and “a legacy of unemployment, imbalance in the trade balance, and technological dependency.”
BYD’s Reaction to Criticism
In contrast, BYD responded with sharp criticism: it claimed that “the dinosaurs go crazy,” accusing rivals of trying to block more affordable electric vehicles for the middle class.
The company alleged that the tone of the traditional automakers was “the dramatic tone of someone who has just seen a meteor in the sky.”
According to the manufacturer, the problem was not the meteor, but the fact that it was “being well received by consumers — those very same people who, for decades, were forced to pay dearly for old technology and lazy design.”
BYD also added that “a Chinese company arrives that speeds up production, lowers prices, and puts electric cars in the middle class’s garage, and the dinosaurs go crazy.”
Gecex-Camex Decision
In light of the escalation, the Executive Management Committee of the Foreign Trade Chamber (Gecex-Camex) decided to adopt a middle-ground solution.
It was defined that the maximum import tariff of 35% for disassembled or semi-disassembled electrified vehicles will be applied starting in January 2027, advancing the deadline from July 2028 by a year and a half.
In parallel, a total tax exemption quota for six months, limited to US$ 463 million, was authorized for the import of CKD and SKD kits.
Repercussions in the Automotive Sector
The decision was well received by traditional manufacturers and the National Association of Motor Vehicle Manufacturers (Anfavea).
Igor Calvet, president of the entity, considered the deadline as “the maximum acceptable without jeopardizing current and future investments in the national automotive chain” and emphasized the hope that the discussion would conclude without the possibility of renewal.
Volkswagen highlighted that decisions like this promote “legal security, predictability, and a healthy competitive environment.”
Meanwhile, GM assessed that the measure represents “an important step towards a fairer and more competitive regulatory environment.”
Middle Ground Between Innovation and Industry Protection
Analysts interpret that the government sought a valid middle ground: traditional automakers won the anticipation of the full tariff charge, while BYD and other new companies maintain a transition space to finalize their production structures in the country.
The agreement puts a temporary stop to the heated public dispute while opening the way for BYD and similar companies to advance their nationalization plans within clearer fiscal parameters.
Traditional automakers, in turn, reinforce their defense of the national industry and job creation.
Which of these elements – tax anticipation, temporary exemption quota, or the impact on the auto parts supply chain – will be more decisive for the future of the Brazilian automotive industry?
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