Import surge becomes biggest challenge for Brazil’s auto parts industry

A sharp increase in auto parts imports, especially from China, has become the main challenge facing Brazilian manufacturers in 2026, according to Cláudio Sahad, president of Brazil’s auto parts industry association Abipeças and the national vehicle components industry union Sindipeças.

“This is not new, but with the tsunami of Chinese brands and models that arrived in the country over the past two years, there is a risk that these imports will intensify in the years ahead,” Sahad said.

He said Chinese brands will need to import parts for their vehicles until their operations in Brazil are fully structured or local sourcing advances. That should increase purchases from China.

Sahad also said the sector must adapt to the auto industry’s decarbonization agenda. “Preparing structures, product portfolios and the search for cooperation and absorption of new technologies are essential for this industry to remain strong,” he said.

The industry is also facing domestic pressures, including high interest rates, a complex tax system while consumption tax reform is still being implemented, expensive credit, household debt and exchange-rate volatility.

“One way or another, these factors end up affecting auto parts companies,” Sahad said.

Datamar’s maritime cargo throughput data shows that auto parts imports rose 4.1% cumulatively between January and April 2026. The chart below compares the month-by-month volumes recorded over the past year:

Auto Parts Imports | Jan 2023 – Apr 2026 | TEUs

Source: DataLiner (click here to request a demo)

From January through May, Brazilian auto parts imports from China rose 23.3% from the same period in 2025. In value terms, imports had risen 271.0% and reached US$4.5 billion last year. Imports from India are also beginning to worry suppliers to the agricultural machinery and construction equipment markets. Purchases from India have increased 353% since 2016 and reached US$1.0 billion in 2025.

Brazil’s auto parts trade deficit reached US$6.3 billion from January through May, up 2.2% from US$6.17 billion in the same period last year. Imports totaled US$9.39 billion, down 1.1% from US$9.50 billion in the first five months of 2025, while exports fell 7.3% to US$3.08 billion from US$3.32 billion.

Industry revenue fell 3.8% from January through April. Sales to automakers rose 1.9%, but revenue from the aftermarket dropped 11.2%.

Sahad said the revenue decline is mainly tied to weaker performance in the aftermarket, which had been the sector’s strongest source of income for years.

“We understand that the aftermarket is facing several difficulties, including the sharp increase in imports of automotive parts and components sold through marketplaces or purchased directly by distributors,” he said.

He also pointed to changes in distributor strategy, with companies operating with lower inventories, and to stronger new-vehicle sales. In the post-pandemic period, new vehicle registrations grew by an average of 4.9% per year.

Sahad attributed the wider trade deficit partly to weakness in Argentina’s automotive market, Brazil’s main trade partner in the sector.

“Through May, vehicle production in Argentina fell 19.3%, which has hurt our sales to that market. Updated figures through May show that auto parts exports to Argentina fell 22.4%,” he said.

More consolidation ahead

Sahad said the competitive pressure coming from China is likely to accelerate consolidation across the automotive sector. Companies will need stronger financial capacity to make the investments required and will also need to combine volumes to increase productivity.

He said this process is already happening among automakers and Tier 1 suppliers, and that consolidation among Tier 2 and Tier 3 suppliers is inevitable.

“Based on that outlook, we have been promoting corporate governance mentoring and the creation of boards of directors for small and medium-sized companies, to prepare them for this consolidation,” he said.

Sahad said the speed of change and the industry’s resilience suggest companies are preparing, at different speeds, for the transformation under way in the global auto sector. He cited measures under Brazil’s Mover program as concrete examples, although he said the resources available under the program remain limited.

Many Tier 1 suppliers are multinationals or Brazilian-controlled companies that have expanded internationally, making them naturally connected to the industry’s ongoing transformation, Sahad said.

“Our greatest challenge is to bring these changes to the rest of the chain, Tier 2 and Tier 3 companies, which are smaller and often family-owned. That means professionalizing management, automating and digitalizing production processes, and reorganizing product portfolios to meet the demands of vehicle electrification,” he said.

Abipeças and Sindipeças have been holding talks with the federal government to address the new environment.

“We hold constant and regular meetings with the Ministry of Development, Industry, Trade and Services, public agencies and other ministries to warn them about these issues. At the same time, we present proposals that can strengthen our industry and improve the business environment,” Sahad said.

He added that the sector has also sought closer ties with Chinese automakers that have announced production in Brazil, with the goal of becoming local suppliers.

Heavy vehicle segment improves

Sahad said Brazil’s heavy vehicle segment is gradually improving.

“The announcement of the second edition of the Move Brasil program brought some relief to automakers and auto parts manufacturers, but we know the funds made available will run out in a few months, as happened in the first edition,” he said.

For that reason, the sector has asked the government to make the program permanent, at least while Brazil’s benchmark interest rate remains so high and vehicle financing remains expensive.

He also cited the launch of a new tender under the Caminho da Escola program, which provides school buses to Brazilian municipalities. The program is expected to deliver 7,470 buses, of which 1,000 to 1,500 are expected this year.

“The incentives have clearly improved the pace of the heavy vehicle market. Truck production rose from 6,800 units in January to 10,500 units in May. Bus production increased from 1,900 units to 3,000 units over the same months. We believe the heavy vehicle market will continue to improve in the coming months, even if slowly,” Sahad said.

On components for the bus market, Sahad said electric buses are growing at an interesting pace, though the segment remains small and regionally concentrated.

According to the Brazilian Electric Vehicle Association, ABVE, Brazil’s electric bus fleet is estimated at 1,500 to 1,600 units, including battery-electric buses and trolleybuses.

“It is a market that tends to grow, although there are major challenges ahead, especially vehicle charging in garages,” he said.

A study by the Institute for Transportation and Development Policy, ITDP Brasil, estimates that more than 14,000 diesel buses could be replaced by electric models by 2030. That would represent growth of 775% from the current electric bus fleet.

Outlook revised

Sindipeças revised its sector forecasts after several factors changed during the first half of the year.

Expected revenue for 2026 was reduced by 4.9%, from R$286.8 billion to R$272.2 billion. Even so, the new forecast would still be 2.5% higher than 2025 revenue.

“In macroeconomic terms, we expected lower inflation, around 4.0%, and therefore a sharper decline in interest rates, to 12.25% per year. We also expected the exchange rate to remain weaker, around R$5.20 to R$5.30. But the war in the Middle East and the surge in oil prices radically changed that scenario,” Sahad said.

He said the association had also expected a recovery, or at least a smaller contraction, in aftermarket revenue and a less severe decline in exports to Argentina.

“Aftermarket revenue fell almost 3.0% last year. That is why we thought there could be a modest recovery. But that is not what we are seeing. Through April, revenue had contracted 11.2%,” he said.

Exports also performed worse than expected.

“In 2025, production in Argentina fell 3.1%, which allowed us to imagine that the decline could be larger than in 2025, but not at the scale we are seeing now,” Sahad said.

Trade balance projections were also revised. The deficit is now expected to be around US$15.0 billion, slightly below the previous forecast of US$16.8 billion.

“Although this may seem contradictory, given that exports are expected to fall almost 10%, imports are also expected to decline, by around 4.0%. Previously, we expected imports to grow 5.0%. Through May, imports had already fallen 1.1%,” Sahad said.

Source: Technibus

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