Chinese Electric Car Companies Coming To Brazil
BYD is making plans to take over the world of electric vehicles. Tesla generates all the headlines while BYD quietly goes about the business of becoming the largest manufacturer of battery-powered cars, trucks, and buses in the world.
A few weeks ago, it announced plans to build a factory in India. Now it says it will invest $600 million to produce electric and hybrid cars, as well as electric buses and trucks, in Camacari, a town near Salvador, which is the capital of the Brazilian state of Bahia. It expects the new venture to supply jobs for 5,000 workers. It has already received 44,000 job applications. Stella Li, the global vice president of BYD, says, “Our dream is to build Bahia state as a center of innovation and high technology.”
Last year, another Chinese manufacturer, Great Wall Motor, had announced it would invest $1.9 billion in Brazil over the next decade to produce hybrid and electric cars in Sao Paulo state. It expects production to begin next year.
There is a curious twist to this story. The BYD facility will occupy what was once a Ford factory. The Great Wall plant will occupy a factory that used to make Mercedes-Benz vehicles. Both are part of a plan by Brazilian President Luiz Ignacio Lula da Silva, who is himself a former metalworker, to “reindustrialize Brazil.” A big part of his plan involve support from China.
Industry observers say there are a host of benefits for Chinese car companies in Brazil, a country of 203 million people with a centrist foreign policy. “There is no geopolitical tension here with China, unlike Europe, the USA or Canada,” Mauricio Santoro, a political scientist and author of Brazil-China Relations in the 21st Century, told Al Jazeera. “There is no vetoing of Chinese companies, the great example being Huawei, which operates in Brazil with total freedom.”
Santoro said the new BYD facility will act as a jumping-off point to expand in the region. “They are going to use Brazil as an export platform to other countries in South America, to countries like Argentina and Chile, which is something that other multinationals also do here.”
Tulio Cariello, research director at the Brazil-China Business Council, added that almost half of China’s current investments in South America are in Brazil, which offers opportunities for Chinese manufacturers. “Brazil is a country that has an emerging middle class,” he told Al Jazeera, “and it is a country where people want to have a car.” According to Brazil’s Institute of Geography and Statistics, just under 50 percent of the country’s households had a car in 2022, compared with 92 percent in the United States.
Brazil is offering a package of incentives to BYD to invest in the country. It includes a 95% reduction in the country’s value added tax until the year 2032, no car ownership tax on electric vehicles up to 300,00 reals ($62,375), and access to the nearby Aratu Port for the import of raw materials and exports of the products it makes locally. Brazilian authorities have also promised to improve the roads to the port as well as withdrawing property taxes, which is dependent on talks with the government of the city of Camacari.
BYD Is Starting On The Ground Floor
The market for electric cars is still in its infancy in Brazil — only 564 were sold in the first quarter of this year. But Cariello said that the Chinese are “pioneers” to establish themselves first in the local market and that Brazil would catch up with more advanced electric car markets in the future.
Rodrigo Zeidan, a professor of finance and economics at New York University Shanghai and at Brazil’s Dom Cabral Foundation, said China’s electric models were more suited to the budgets of middle-income countries like Brazil. “The Western companies are building more valuable models like Tesla. The Chinese manufacturers, they produce cheaper stuff,” he told Al Jazeera. “It is a middle income market in which consumers are not that rich, and they know this market.”
Stella Li told the O Globo newspaper in early July that her company planned to bring the Seagull, a low priced, compact SUV, to Brazil. It currently sells in China for the equivalent of 55,000 reals ($11,450), an ideal price range given that 90% of Brazilians earn less than 3,500 reals ($728) a month. What the price of the car will be in Brazil is unknown at this time.
Headwinds Ahead
Rogrigo Zeidan warns that the current infrastructure to support electric vehicles in Brazil is woefully inadequate and building charging stations for cars across the vast country “requires long term planning.” Mauricio Santoro agrees. He says that while generous state subsidies and loans may make it possible for companies like BYD to operate on longer timeframes to profitability than their competitors, there are significant challenges to be met. For one, the Chinese economy has been slow to recover from the disruptions caused by the recent pandemic. In addition, geopolitical tensions with other world powers — especially the United States — may limit the ability of the Lula government to “reindustrialize” Brazil.
“The rhetoric that the Chinese will somehow reindustrialize Brazil, that is an exaggeration,” Zeidan said. “No country has managed to reindustrialize.” He also is critical of the tax breaks that are being given to BYD. He says Ford and other automakers had been offered similar incentives to entice them to do business in the country but they decided to pull out anyway.
“Brazil has thrown a lot of money at car companies,” he said. “It’s a lot of public money given to privately owned companies. The question is can BYD make enough money to justify being in Brazil 30 years from now?”
Chinese Ambitions
The United States is often criticized for its America First policies. American exceptionalism plays well to the folks back home, but it grates on the nerves of other countries that feel they must always kowtow to Washington. China is more than happy to play on those concerns to advance its own agenda.
The plan to enter the Brazilian market by BYD partly reflects China’s ambition to play a significant economic and political role in South America. Al Jazeera says the BYD initiative may mark the start of a new chapter of the continent’s most defining geopolitical shift this century. China is Brazil’s top trading partner, having overtaken the United States in 2009, with nearly $151 billion in trade between the two countries in 2022, according to official government data.
Now serving his first year of a historic third term, president Lula re-established openly warm relations with Beijing with an April visit to China where he met with Chinese President Xi Jinping. The visit seemed aimed at repairing a relationship previously strained by the anti-China stance of far-right former president Jair Bolsonaro.
BYD may be focused on building its own dreams, but no Chinese corporation can stray far from the party line as issued by the central government in Beijing. The takeaway from all this is the US will soon find itself surrounded on all sides by Chinese electric car companies. That’s something for its domestic car companies — and the federal government — to think very carefully about.
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