RIO DE JANEIRO, BRAZIL – The plan to electrify transportation in the United States, announced during the Climate Summit last week, was the missing piece in a historic turnaround for the global automotive industry.
The adhesion of the world’s second largest vehicle market to a trend now strong in Europe and China expands the use of electric cars on the planet. Concurrently, the innovation is placing greater pressure on Brazil.
The survival of an impressive industrial park, which places the country as the 8th largest vehicle producer in the world, also depends on the decision as to what kind of car will be sold to Brazilians.
From a market standpoint, Brazil faces the same challenges as other emerging economies. The fully electric cars available are imported and expensive by most consumers’ standards.
The high cost renders local production unfeasible and, to make matters worse, there is a lack of infrastructure for charging batteries. These are issues that demand joint efforts, from governments and the private sector, and, above all, resources.
In wealthy countries, in addition to investing in infrastructure, governments offer bonuses to those who exchange their combustion-powered cars for electric ones.
A country with a high fiscal deficit, health and housing problems, aggravated by the pandemic, and a large part of the population in poverty can not be expected to follow Germany’s example. In June 2020, Chancellor Angela Merkel raised the value of the bonus granted by the government to those buying an electric car from €6,000 (US$7,242) to €9,000.
In the United States, the package that President Joe Biden proposed for the electrification of transportation amounts to over US$300 billion in investments in infrastructure, battery charging stations, and incentives for technological development.
If Brazil were a country without an automobile industry, like Chile, for example, it would be enough to define which imported vehicles offer the best cost-benefit ratio. If the choice were electric, the installation of the infrastructure for charging batteries would be the main challenge. But in Brazil, a wrong step would endanger the more than 40 assembly facilities spread among 10 states that have been operating at almost half capacity for some time.
This industrial activity represents 3% of the GDP in Brazil and depends heavily on the domestic market, the 6th largest in the world. It is precisely to protect this industry that the import tax on automobiles has always been high.
Except for two low-volume production lines of hybrid models at Toyota, with prices above R$160,000, there are no plans in the short or medium term for the production of 100% electric cars in the country. The imported models cost more than R$200,000.
Automakers may choose to maintain the combustion vehicle lines for a few years, until the cost of electric cars drops to the point of justifying local production. This would also lend time to organize the infrastructure for recharging batteries. But until then, the industry’s exports would be even more limited to poorer neighboring countries, which would increase the idle capacity of the factories. This would also lead to a further shift away from technological development and research in this area.
The good news is that the expansion of the use of electric vehicles, now reinforced by the U.S., will cause the cost of the electric car to drop, which, consequently, may favor its commercialization in countries like Brazil, says Jaime Ardila, an expert in the automotive industry and founder of the Hawksbill Group, an international consulting firm based in the U.S.
However, the obstacle “continues to be the need for the infrastructure to be financed and developed by the government. It is hard to see this item becoming a priority in the budget in the short term, when there are other needs,” Ardila says.
“Maybe, within the commitments made at the Climate Summit, some subsidy in this area could appear for Brazil in exchange for the protection of the Amazon forest. But this would require a much greater commitment from the Brazilian government,” adds the expert.
For some time now, automakers have been expanding the supply of electric models to meet the strict emissions rules, especially in Europe. Some countries have already set dates to end sales of fossil fuel-powered vehicles.
Norway has led the way by banning the sale of this type of car by 2025. In 2030 it will be the turn of the United Kingdom, the Netherlands, Ireland, Sweden, Iceland, Denmark, and Slovenia. Canada, Spain, and France will follow (2040). Chinese cities and California have set similar dates.
In Norway, fully electric models accounted for 56% of sales in March. Added to the hybrid versions, the total Norwegian market for electrified vehicles reached 84.8%, according to Electrive, the European electromobility information service.
In the European market, the share of 100% electric cars (recharged only at the plug) and hybrids (which include a combustion engine to charge the electric one) rose from 3% to 23% between the end of 2019 and December 2020, according to the Brazilian Association of Electric Vehicles (ABVE).
In the United States, the share of electrified cars is still small – 2%. In Brazil, although in expansion, the share of electric and hybrid cars stood at 1% in 2020, according to ABVE.
The president of ABVE, Adalberto Maluf, points out tax distortions as one of the enemies of electric cars in Brazil. “Why does a flex fuel car pay 7% IPI and the electric one pays 13%, 18% or even more? The calculation of taxes for vehicles in force in Brazil takes into account the cylinder capacity of the combustion engine.”
Three years ago a working group was formed with representatives from the automakers, importers and the federal government, aimed at creating the so-called National Plan for Electromobility. But the pace of discussions has slowed appreciably during President Jair Bolsonaro’s administration.
Recently, the National Association of Automotive Vehicle Manufacturers (ANFAVEA) began meeting with representatives of sectors related to energy, such as Petrobras and the Union of Sugarcane Agribusiness (UNICA), to find the best energy matrix for vehicles in the country.
A large part of the automakers defends a better use of ethanol, a renewable source of clean energy from plants. The industry is also developing options for biofuel-powered engines, mainly in trucks.
But meanwhile, outside of Brazil, the electric car is the star of the moment. In January, the world president of General Motors, Mary Barra, announced aggressive goals, with the launching of 30 new electric models by 2025.
In Germany, the world president of Volkswagen, Herbert Diess, announced in March the goal of selling 1 million electric vehicles this year and becoming the global leader in this market by 2025.
The best showcase of what’s new in electrics can be seen this week in Shanghai. The Chinese city is holding the world’s first in-person auto show since the pandemic began. Cars from automakers that have already stopped producing in Brazil are on display at the Shanghai Auto Show.
This is the case of the luxurious EQS, from Mercedes-Benz, which in December announced the closing of the automobile plant in Brazil. Built in Iracemápolis (SP), the operation spanned only five years.
It lost its meaning when the Germans realized that both the plant and the country were unable to meet the new order within the company: to produce only electric cars. Ford, which announced the definitive end of the industrial activity in Brazil in January, takes advantage of the Shanghai salon to launch the electric Mustang.
But the show’s greatest sensation is the Hong Guang Mini EV, which costs US$4,200. Produced by the joint venture between General Motors and the Chinese Saic and Liuzhou, the new “popular” electric is the best example of the revolutionary transformation of the automobile in this century.
Source: Valor