Brazil has ended a temporary exemption from tariffs on electric and hybrid vehicles with Chinese parts, raising costs for manufacturers such as BYD and ending an episode of tension with the local car industry.
The measure, which had been in force since August 2023, expired on January 31 without being renewed, sources confirmed to the Hong Kong newspaper South China Morning Post, putting an end to an incentive that especially favored Chinese automakers that operate on a pre-assembly basis.
With the end of the exemption, companies will once again pay import tariffs of 35% on SKD (semi-knocked down) and CKD (completely knocked down) assembly kits, which were previously subject to rates of 18% and 16%, respectively.
In practice, SKD kits arrive almost fully assembled in the country and require little local labor. CKDs include parts separately for assembly in Brazil, but still depend mainly on imported components.
The reduced tariff was approved following a request from Chinese automaker BYD, which was preparing to begin large-scale operations in Brazil.
The decision sparked protests from traditional manufacturers based in the country, who accused the Government of unduly favoring foreign companies with low local production.
With the end of the exemption, companies such as BYD and Great Wall Motor now face significantly higher costs to operate in the Brazilian market unless they accelerate investments in national production.
The decision marks the end of months of friction between the Brazilian Government, Chinese automakers and the Brazilian automobile industry, which demanded fair competitive conditions.
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