Surge in Electric Vehicle Imports from China Causes Ripple Effect on Brazilian Freight

The inbound shipments of electric vehicles produced in China, particularly from BYD, have significantly impacted products with lower added value in Brazil due to a cascading effect on costs. This includes increased maritime freight, import taxes, and transportation expenses, which have affected Brazilian ports such as Santos.

Imports surged in the first half of this year as companies rushed to import vehicles before the new import tax rates took effect on July 1. The new tariffs are set at 25% for hybrid models, 20% for plug-in hybrids, and 18% for fully electric cars, up from 10% for all three categories previously.

These rates will increase to 30%, 28%, and 25%, respectively, by July next year. In July 2026, the rates are expected to rise to 35% for all three types. Consequently, companies aim to import as many vehicles as possible before the rates peak, leading to fuller ships and less available space.

“Chinese automakers have seized the opportunity to shift operations and accelerate vehicle shipments, utilizing significant space on large cargo and conventional ships and occupying many containers. This elevates transportation costs for other products due to limited ship space, and when space is available, prices rise,” explains logistics expert Lúcio Lage Rodrigues, also director at Process Log & Comex.

Rodrigues notes that international freight costs for a container from China to Brazil were less than $3,000 (approximately R$16,300) at the beginning of the year but have now approached $10,000 (around R$54,500).

“Since import taxes are calculated based on the international freight value, the total cost increases further. This affects all types of products, making them more expensive in Brazil. Lower-value products are particularly affected due to the more significant percentage increase,” he adds.

Rodrigues points out that the rise in maritime freight costs is factored into the import tax calculations, significantly impacting the final product prices.

“It’s a cascading effect since there are multiple taxes and tariffs. While the rates remain the same, the calculation base increases. Consequently, the values for Import Duty (II), Tax on Industrialized Products (IPI), PIS/COFINS, Tax on Circulation of Goods and Services (ICMS), and the Merchant Marine Fund Surcharge (AFRMM) rise. As a result, the final product prices increase,” he lists.

The chart below uses DataLiner data to compare long-haul container imports and exports at the Port of Santos between January 2021 and June 2024.

Santos Container Movement | Jan 2021 – Jun 2024 | TEU

Source: DataLiner (click here to request a demo)

Solutions

Wellington de Jesus Victoriano, Vice President of the National Federation of Customs Brokers (Feaduaneiros), notes that, despite the rising rates, there has not yet been a noticeable reduction in the import of these vehicles.

“Not only did the Port of Santos experience impacts from this cascading effect, but so did others like the ports of Rio de Janeiro, Vitória in Espírito Santo (specifically Vila Velha Terminal), and Suape in Pernambuco, among others. Generally, any logistical congestion impacts the entire supply chain and can increase operational costs, as smooth flow is crucial for foreign trade and maintaining profitability,” he analyzes.

Rodrigues suggests possible logistical alternatives: “Consider routes with longer transit times but lower costs. Another option is using alternative containers, such as refrigerated containers with the power turned off (NOR), which generally have lower rates.”

Boost for Domestic Industry

The increase in import taxes on electric vehicles and the cascading effect on prices may also encourage domestic industry investment in production due to the rising costs.

“We believe so. Importation is always a gateway to new technologies and improving current ones. For example, some BYD models, the Chinese giant in the electric vehicle sector, will be produced at the Camaçari plant in Bahia, marking a new era for the Brazilian automotive industry,” says Wellington de Jesus Victoriano.

Logistics expert Lúcio Lage Rodrigues believes this process will depend heavily on government actions, such as incentives to attract automakers to Brazil. “This is a broader issue, but incentives may be provided in one way or another, though it’s a more global matter,” he concludes.

Government Response

The Ministry of Development, Industry, Commerce, and Services stated that the gradual reintroduction of import taxes on electric vehicles aligns with the government’s policy of incentivizing the production of sustainable vehicles in Brazil.

“Incentives are included in the Green Mobility and Innovation Program (Mover), launched in December 2023. Mover encourages investments in new technologies and increases decarbonization requirements for the Brazilian automotive fleet, including cars, buses, and trucks. Since its launch, automakers with factories in the country have announced investments totaling R$130 billion,” the ministry stated.

Potential

The ministry adds that this measure “contributes to knowledge production, job and income creation in Brazil while leveraging the country’s potential in both installed production capacity and diversification of the energy matrix, as well as in sustainable automotive technologies – for example, the production of hybrid electric vehicles powered by ethanol, which is among the investments already announced by automakers.”

Source: A Tribuna

Click here to read the original news report: https://www.atribuna.com.br/noticias/portomar/porto-de-santos-e-porta-de-entrada-de-carros-chineses-mas-importac-o-eleva-frete-1.431584

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