Argentine demand boosts Brazil’s auto exports

Vehicle manufacturers are bracing for a slowdown in domestic market growth, but will be able to maintain production levels thanks to increased exports to the Argentine market.

Driven by stronger demand in the neighboring country, the share of foreign sales in Brazil’s automotive industry has risen from 14% to 25% in a year.

After noting the recovery of the Argentine market — the sector’s main export destination — automakers had been preparing since January to increase volumes. In January, automakers’ association Anfavea projected a 7.8% increase in exports for 2025.

However, the results of recent months have exceeded expectations, said Igor Calvet, president of Anfavea. On Thursday (7), the association sharply revised its projection, now forecasting a 38.4% increase in exports this year.

In the past year, Brazilian vehicle exports to Argentina have surged 156.5% (183,900 units), boosting Argentina’s share from 35% to nearly 59% of the sector’s total exports. Although sales to other neighboring markets such as Colombia and Chile also grew, Argentine demand is the main reason Anfavea calls the result a “surprising increase.”

From January to July, Brazil exported 312,100 vehicles, representing a 52.7% increase from 2024. Export revenue for automakers totaled US$8.33 billion, representing a 43.9% year-over-year increase.

According to Calvet, foreign demand has been the main factor driving the industry to hire more workers in recent weeks. In just one month, automakers created 400 jobs. With a total of 109,100 employees, employment in the sector has risen 4.4% over the past year.

The outlook for higher exports is helping the sector offset slower expected growth in the domestic market and maintain the production forecasts announced earlier this year.

Anfavea has cut its projection for domestic market growth in 2025 from 6.3% to 5% (2.765 million units). However, it has kept its production growth forecast at 8.4% (2.749 million units).

Not even the federal government’s Sustainable Car incentive program will reverse the trend. The program exempted a list of basic cars from the IPI tax, which in its first month boosted sales of those models by 16.7%.

Anfavea points to high interest rates as one of the main factors dampening demand, particularly for trucks. The association is pessimistic about the demand for heavy-duty cargo vehicles.

Since the start of the year, truck sales have fallen 4.1%, and the situation could worsen in the coming months. The projection for domestic truck sales in 2025 has been revised from a 0.2% increase to an 8.3% drop. “Instability hurts us, and high interest rates kill us,” Calvet said.

Beyond the benchmark interest rate — now at its highest since 2006 — another factor could impact assembly line activity. According to Calvet, the truck market will also feel the effects of the U.S. import tariff hikes that took effect Wednesday. Nearly all goods exported from Brazil to the U.S. are transported by truck to ports.

The tariff hike announced by President Donald Trump will also impact exports of automotive components, including engines. In this case, the rate jumped from 2.5% to 27.5%, which Anfavea estimates would have a US$268 million impact if shipment volumes are maintained — something Calvet doubts will happen.

Presenting the sector’s results, Calvet again criticized the influx of Chinese-made vehicles. Imports from China are approaching the volume from Argentina.

Between January and July, 87,800 Chinese cars were sold in Brazil, representing a 41.2% increase from the same period in 2024. From Argentina, imports totaled 121,400 units, representing an 11% year-over-year increase.

“Imports from Argentina are beneficial because we also export there, but we don’t sell anything to China,” Calvet noted.

At the same time, he praised the recent decision by Brazil’s Foreign Trade Chamber (Camex) to limit to six months the duty-free period for imports of semi-knocked-down vehicles. BYD, which is preparing to produce in Brazil, had requested a one-year period. Camex also capped the volume of these vehicles under quotas available to all brands, including Anfavea members.

Source: Valor Econômico

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