Chinese vehicle giant BYD is shipping thousands of electric vehicles (EVs) to Brazil ahead of a progressive tariff program that will make importing EVs to the South American country increasingly costly. As China was locked out of the lucrative European and American auto markets via import tariffs, Chinese carmakers began looking for alternative markets to sell their affordable electric cars.
As the largest economy in South America, Brazil was a natural target for automakers like BYD that were seeking opportunities for growth. Unfortunately for BYD and other Chinese automakers, their efforts drew the attention of Brazil’s powerful carmakers’ lobby, which began putting immense pressure on the Brazilian government to levy import tariffs on electric cars imported from China.
Since most Chinese-made electric vehicles were, on average, much cheaper than vehicles manufactured in the West, automakers operating in Brazil risked being muscled out of the Brazilian market by Chinese firms like BYD. Thanks to lobbying efforts by these automakers, Brazil has applied a progressive tax for imported electric cars that began at 10% in January 2024 and will reach 35% by July next year.
As a result, BYD is exporting thousands of electric cars to Brazil before the rising import taxes make exporting to the massive South American market cost-prohibitive. The tariff currently rests at 18% and will increase to 25% in July, increasingly eroding the profits BYD would have made in Brazil.
As the most dominant electric vehicle company in Asia and the second-largest EV maker in the world after Tesla, BYD experienced near-exponential growth since 2022 when it exclusively focused on EV production. BYD temporarily surpassed Tesla as the most prolific EV maker on the globe but has since faced one major challenge that has slowed down its global expansion; import tariffs.
With Europe, the USA, and Canada all levying steep tariffs on electric cars manufactured in China, BYD and other Chinese automakers have essentially been locked out of most large foreign EV markets.
Last month, the Shenzhen, China-based company shipped 7,300 new EVs, followed by two other enormous vehicle shipments that cumulatively made up BYD’s largest-ever export exercise to Brazil. BYD will most likely continue its mass EV exports to Brazil until the progressive tax program makes it too expensive for BYD to sell its electric cars in the country.
Although these cheap electric cars have left many Western automakers worried about their fate, they have been welcomed by consumers who simply want EVs and aren’t concerned with where they came from. For many Brazilian drivers, BYD’s last-ditch effort to flood the market with electric cars could allow them to purchase an electric car before import tariffs make them too expensive.
In the U.S., enterprises like Massimo Group (NASDAQ: MAMO) have an opportunity to deepen their market penetration as existing tariffs lock out foreign-made EVs, especially those from China.
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