Brazilian government increases tax rate for imported cars

Restricts tariff-free imports from Mexico

2012/05/11

Summary

 The following reports mainly the activities during the last one year in Brazil and Argentina. The protectionist measures by the two governments are currently having a huge impact on the automotive industry.

 In 2011, sales of vehicles in Brazil totaled 3.633 million units, up by 3.4% year-on-year. Yet, sales of vehicles in Brazil made a year-on-year decrease in the October-December period; those in the January-March period of 2012 also fell by 0.8%. In 2011, sales of imported cars increased by 30.0% to 858,000 units due partly to appreciation of real; the ratio of imported cars surged to 23.6%. Among imported cars, imports of vehicles made by Korean and Chinese OEMs, which do not produce vehicles locally, surpassed 200,000 units.

 The Brazilian government increased the tax rate of "IPI (Industrialized products tax)" for imported cars by 30 percentage points in December 2011 in order to minimize the increase of imported cars and to protect employment and investment in Brazil.

 In March 2012, the Brazilian government also reached an agreement with the Mexican government, asking for restrictions on surging imports from Mexico. During the three years from March 2012 to March 2015, the government sets a ceiling on the value of tariff-free imports from Mexico (the 2012 ceiling is 70% of the 2011 actual import value).

 In 2011, Korean and Chinese OEMs significantly increased imports and sales in Brazil, but since the tax rate of IPI for imported cars is increased, several OEMs are currently planning to produce vehicles locally in Brazil.

 In 2011, Argentina produced and sold the record highs of 829,000 and 884,000 vehicles, respectively. More than 60% of production are exported; imported cars continue to account for more than 60% of vehicles sold in Brazil. The Argentine government requests that OEMs that produce vehicles locally should increase exports and that the Mexican government should take the same measure to limit exports as it does to Brazil.


Related Reports:
Brazil: Fiat/VW/GM set to sell 1 million autos each in 2014 (Jan. 2011)
Japanese suppliers in Mexico/Brazil: rush to build plants and increase production (Feb. 2012)