Chinese automakers flood Brazil amid intensifying competition in Asia

Chinese automakers — including BYD, GWM, and others — are “invading” Brazil and other countries, with part of this movement tied to intense competition in China itself.

The rapid rise of Chinese brands has triggered alarm bells for the auto industry already established in Brazil. Their offensive comes amid an already challenging scenario, marked by high interest rates and rising loan defaults, adding more complexity to the playing field.

According to The Economist, behind China’s global expansion is also the ambition to establish itself as a worldwide industry leader. To this end, automakers are also receiving significant government subsidies.

BYD and GWM bring factories to life

The Chinese advance in Brazil is taking place on three main fronts: a significant increase in imports, the establishment of local factories, and the formation of strategic partnerships with established companies.

BYD has quickly cemented itself in the Brazilian market, ranking fifth nationally in June, with an 8.7% retail market share across cities in all regions of the country. It is the market leader in 104 municipalities, including capitals such as Maceió, Brasília, and Porto Velho.

In the electrified vehicle segment (hybrids and electric), BYD dominates — in the 100% electric category, it holds a 77% market share. Its expansion is fueled by a robust import strategy, including the use of its fleet of cargo ships, such as the BYD Shenzhen, which unloaded 7,292 electric vehicles at the port of Itajaí (SC) in May, marking the largest operation of its kind ever recorded in Brazil.

Chinese vehicle imports are expected to grow by nearly 40% this year, reaching approximately 200,000 units, or 8% of total light vehicle sales in Brazil.

Beyond imports, local production plays a key role in the strategy. BYD is investing R$5.5 billion in the former Ford plant in Camaçari, Bahia. This will become the group’s largest facility outside Asia, with the capacity to manufacture 600,000 vehicles per year and the potential to become an export platform for the Americas.

However, the initial production in Brazil is of the SKD (semi-knocked-down) type, where vehicles arrive from China with the bodywork already welded and painted, and most of the other components — nearly all of which are imported — are assembled at the Bahia plant. So far, only one domestic supplier, Continental Tires, has been approved, although 105 other Brazilian companies are in the process of certification.

GWM (Great Wall Motors) is also expanding rapidly in Brazil, growing seven times faster than the national automotive sector average in the first half of 2025, with 15,261 vehicles registered. The Haval H6 model has become the best-selling hybrid SUV in Brazil so far this year.

The automaker is also preparing to open its factory in Iracemápolis (SP) later this year, with a total investment of R$10 billion through 2032. The company has announced its intention to increase local sourcing, prioritizing domestic suppliers.

Another Chinese giant, Geely, which controls Volvo Cars, is resuming operations in Brazil after a nine-year hiatus. The brand delivered 680 electric vehicles to Paranaguá (PR) in June and plans to begin sales this month.

It has also formed a partnership with the Renault Group to potentially produce hybrid and electric vehicles in São José dos Pinhais, Paraná (PR), which could lead to Geely taking a minority stake in Renault Brazil.

Global pressure from Chinese automakers

The aggressive push by Chinese automakers in Brazil reflects a broader global trend. China has become the world’s largest car manufacturer and exporter. Its car exports have tripled in the past three years, reaching 4.7 million units in 2023, with projections of 7.3 million by 2030.

This expansion is being driven by a severe overcapacity in production and a fierce price war in the domestic electric vehicle market, where 115 brands compete. The Chinese government has already voiced concern about the predatory nature of this competition, which “undermines investment in research and development and may compromise safety,” and is attempting to intervene to prevent cars from being sold at a loss.

Amid this domestic environment, Chinese automakers are seeking new markets. Their focus has shifted to the “Global South,” including Latin America, Southeast Asia, the Middle East, and Africa — regions with less stringent emissions regulations and weaker domestic competition. In 2024, Chinese brands accounted for 82% of battery electric vehicle sales in Mexico, Brazil, Argentina, and Chile.

In Europe, growth has also been significant. According to automotive industry consultancy Jato Dynamics, Chinese brands more than doubled their market share in May 2025 compared to the previous year, reaching 5.9% of total sales. In April, BYD surpassed Tesla in electric vehicle sales in Europe for the first time. BYD’s global vice president, Stella Li, has stated that Europe is the most critical region for the company.

To navigate tariffs and freight costs, Chinese companies are also building factories abroad. BYD is constructing a plant in Hungary. Although it paused plans to build a major factory in Mexico due to geopolitical tensions and trade issues, its Brazilian plant is the first outside Asia.

This “global invasion” is not without resistance. Countries like Russia have introduced “recycling” fees on imported cars to slow the Chinese advance. The European Union has also imposed tariffs on Chinese electric vehicles. In response, companies like MG (controlled by China’s SAIC) are shifting toward hybrid cars in Europe, which are exempt from these tariffs — demonstrating their adaptability and continued drive for market expansion.

Beyond China, high interest rates and rising defaults are a concern for Brazilian automakers

The rapid Chinese advance has raised concerns for Brazil’s established automotive industry. Igor Calvet, president of Anfavea (National Association of Vehicle Manufacturers), expressed “concern” over the surge in imports, which accounted for 54% of market growth in May.

He pointed out a mismatch between market expansion and stagnant domestic production: while sales of locally made vehicles rose 2.6% in the first half of 2025, imports jumped 15.6% during the same period. Retail sales of Brazilian-made light vehicles dropped by 10%.

One primary concern is employment. The Brazilian auto industry has lost more than 600 direct jobs in recent months.

Calvet warns that the number of imported vehicles (228,500 units in the first half of 2025) is equivalent to the annual output of a large national factory, which would create more than 6,000 direct jobs — not including the entire supply chain. He also notes that simpler assembly processes, like SKD/CKD, generate only about two to three indirect jobs per direct job, far fewer than the ten-to-one ratio seen in complex production facilities.

Anfavea is lobbying against the reduction of the import tax on semi-knocked-down vehicles, arguing that such a move would amount to “deindustrialization” and hurt local production.

At the same time, the group is urging the government to accelerate the planned increase in import taxes on electric vehicles to 35%, a level initially slated for mid-2026. On July 1, import taxes rose to 18% for electric cars, 20% for hybrids, and 25% for plug-in hybrids.

Brazil’s broader economic situation adds another layer of difficulty. The Selic benchmark interest rate, currently at 15% per year, is the highest since 2016 and is expected to remain elevated, making credit more expensive. Defaults are also rising, reaching 3.3% among businesses — the highest since 2017 — and 5.16% among individuals, the highest since 2023, according to the Central Bank.

This tighter credit environment is having a direct effect on heavy truck sales, which fell 3.6% in the first half of 2025. Fleet operators are postponing replacements due to high financing costs.

Representing dealerships, the National Federation of Automotive Vehicle Distributors (Fenabrave) emphasized the challenges posed by high interest rates, which impact financing and especially affect the truck and trailer segments.

Nonetheless, Fenabrave president Arcélio Júnior noted that the passenger car and light commercial vehicle markets, which cater more to individuals, are less affected, benefiting from substantial employment and rising incomes. Automakers’ banks are also offering more favorable financing terms, helping sustain sales.

Fenabrave’s projections for 2025 have been revised downward for trucks (down 7%), but they maintain expected growth for cars (5%), buses (6%), and motorcycles (10%).

Source: Gazeta do Povo

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