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ANALYSIS AND NEWS - MARKET NEWS - AMERICAS


SALES DRIVE: CHINESE EVS ON THE ROAD TO SUCCESS IN LATIN AMERICA

04 Oct 2024
 * 
 * 
 * 
 * 

 * Doris Yu, Special Correspondent, Brasilia

Demand for EVs in Brazil is growing fast, prompting investment from Chinese
carmakers looking to challenge the global auto brands.

Clean, green machines: Chinese EVs set to be streets ahead in Latin America.

Brazil’s car market is booming, especially in the increasingly vital electric
vehicle (EV) segment. Accordingly, China’s powerful EV makers are looking to tap
into the enormous potential of not just Brazil but also the other major Latin
American markets. This has seen many of them invest in local production
facilities, while leveraging their advantages in terms of costs and new
technology to compete with longer‑established European and American car brands.

Last year, Brazil’s total vehicle sales rose almost 10% to 2,308,140 units, up
from 2,104,050 units in 2022, according to the country’s association of
dealerships. Within this, sales of new vehicles rose 9.1% to 1,720,841 units. In
December 2023 alone the market grew by 14.6%. This market expansion has been
driven by the foreign investment flowing into the country, as consumer and
business confidence increases.

The government has also played a supporting role through such initiatives as the
stimulus programme it launched in June 2023. This allocated BRL800 million
(US$142 million) in tax discounts for popular car models, BRL700 million for
trucks and buses, and BRL300 million for minibuses.

Driven by eco concerns

With Brazil’s EV market growing faster than its carbon‑emitting vehicles
counterpart, many experts believe this shift is being powered by increasing
environmental awareness among Brazilian consumers. One such expert is Francisco
Duran, a Colombian automotive engineer and a Professor at ECCI University in
Bogota.

Arguing that South American consumers are seeking less polluting alternatives to
internal combustion vehicles, he said: “For many years, we relied on fossil
fuels, such as diesel and gasoline, for our transportation. Now consumers are
actively looking for greener alternatives.

“EVs have emerged as a top option, and we are seeing demand for EVs rising
significantly across Latin America.”

The potential of this burgeoning market has already attracted significant
attention from Chinese automakers. Citing the mainland marques he sees as
leading the way, Henrique Reis, International Relations Manager at the China
Trade Center Group in Sao Paulo, said: “The primary Chinese companies active in
Brazil’s automotive sector are BYD, Kawa Cherry and Jac Motors.”

Digging a little deeper into this, Daniel Lau, Partner and Executive Director at
international accounting giant KPMG, said: “The two automakers that have
established perhaps the strongest presence in Brazil are BYD and Great Wall
Motor (GWM). Both have made significant investments in the country.”

BYD, in particular, has made major commitments to vehicle manufacturing in
Brazil. In late 2022, the Shenzhen‑based multinational revealed plans to deliver
100 e‑bus chassis to Sao Paulo in early 2023. It is also investing around US$600
million to establish a new EV factory in Camaçari, Bahia, which is expected to
create 5,000 jobs locally. Significantly, the plant will benefit from the
10‑year tax incentives on offer from Bahia’s state government.

Charging ahead: New EV‑friendly power infrastructure now a regional priority.

GWM, which specialises in SUVs and pick‑up trucks, has similarly expanded its
footprint in Brazil. It plans to invest approximately BRL10 billion by 2032,
producing eight vehicle models domestically. Noting that the company appears to
be the mainland manufacturer most committed to the Brazilian market of all the
mainland peers, Reis said: “GWM is clearly the company investing the most in
Brazil currently. I also believe it has the strongest potential to expand its
market share in the long run.”

In order to ramp up its EV production, GWM will open a new factory in Brazil in
May 2024 with an initial annual capacity of 100,000 units. The plant is expected
to become the company’s fourth‑largest manufacturing site worldwide, creating
nearly 2,400 jobs, serving the Brazilian market as well as others across Latin
America.

Playing to Chinese strengths

While Chinese automakers have made significant inroads recently, Reis maintained
that global brands still dominate much of Brazil’s automotive sector, saying:
“Currently, the main players in the country are Fiat Automobiles, Volkswagen and
General Motors. Competition remains fierce with other international
manufacturers as well.”

To compete against these established global giants, Chinese automakers are
playing to their strengths – advanced technology and lower prices, essentially –
both in Brazil and in many other international markets. Explaining how the
mainland marques have upped their game to win market share, Reis said: “Chinese
firms have improved their technology to gain more consumer trust. They have also
developed considerable expertise in electric car production. Also, the prices of
Chinese EVs are very competitive.”

Chinese EV manufacturers enjoy another major advantage in the EV segment of the
auto market – their dominance of the EC production supply chain for EV
production. Indeed, China is currently by far the biggest player globally when
it comes to the provision of the raw materials and components required to
manufacture EVs.

A key factor is battery cell production, the most expensive EV component and an
industry heavily concentrated in China. Outlining the significance of this,
Duran said: “Basically, it means that Chinese companies can offer a high‑quality
product at a lower price than many of their international competitors.”

Infrastructure issues

While rising EV sales and government support indicate that opportunities abound
in Brazil’s automotive sector, there are still a number of challenges that could
hamper continued growth should they remain unaddressed. Singling out the most
serious of these obstacles, Reis said: “The market is highly competitive, while
Brazil’s EV infrastructure remains underdeveloped compared to its internal
combustion resources.”

There is, for example, still no widespread charging network in Brazil to support
EV adoption. Official estimates, however, suggest that the number of charging
stations will reach 10,000 units by 2025, up from only 1,600 now. Data from the
Brazilian Electric Vehicle Association, meanwhile, indicates that 10 of Brazil’s
26 Brazilian states currently lack any charging infrastructure at all.

In the case of Latin America as a whole, the business environment presents
additional challenges for carmakers. Summing up the somewhat chaotic situation
across the region, Duran said: “Throughout Latin America, policies vary from one
government to the next. Countries do not have uniform laws, and policies often
change with each new administration that takes or leaves office.

“This makes it challenging for any Chinese EV manufacturer looking to establish
itself quickly in the Latin America market.”

--------------------------------------------------------------------------------

All views expressed in the Market News section reflect those of the individual
correspondent and any interviewees. They are neither endorsed nor verified by
the HKTDC.



RELATED TOPICS

Auto Parts & AccessoriesBrazilCentral & South AmericaELECTRIC
VEHICLESEVSTRUCKSCHARGING STATIONSCAR MANUFACTURINGAUTOMOTIVE


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