Countries such as Brazil, Colombia, Ecuador, Mexico, and Peru are experiencing a boost in their electric vehicles due to trade agreements.
At first glance, China is the main trading partner for Latin America, offering a variety of options and prices, thereby democratising access to electromobility due to its low or zero tariffs.
These agreements not only affect market dynamics but also spark debates about reindustrialisation, local production, and the future of the automotive industry in the region.
Below, Mobility Portal Latinoamérica provides a list of details for each country.
Brazil
Earlier this month, the Brazilian government committed to China to promote electromobility and attract new investments.
It is worth noting that in 2015, the government introduced a zero-tariff subsidy for the import of electric cars.
This move made the South American giant the largest market in Latin America, with 93,927 electric and hybrid vehicles registered in 2023.
In January, Brazil’s Ministry of Development, Industry, Commerce, and Services (MDIC) announced the return of the import tax.
The resolution outlines the gradual reintroduction of tariffs and establishes initial quotas for tariff-exempt imports until 2026, when the rate will reach 35%, the same as for combustion vehicles.
By the end of 2023, the government decided to gradually remove the tariff exemption for electric and hybrid cars to benefit local manufacturing.
Colombia
The Colombian market has free trade agreements with Mexico, the United States, Canada, Europe, and Mercosur countries such as Argentina and Brazil.
This results in a high volume of imported goods, even without import tariffs, but presents a challenge for developing the local industry.
This is why Colombian President Gustavo Petro‘s intention to produce electric vehicles in the country has generated mixed reactions.
In an interview with Mobility Portal Latin America, Ariel Montenegro, President of Renault Sofasa, emphasised that to industrialise, one must focus on exports rather than the domestic market.
“A reindustrialisation policy is unsustainable without export incentives and without positioning Colombia as a supplier to neighbouring markets that contribute to the industry,” he stated.
This is where recent news comes into play. Just a few days ago, Colombia’s Minister of Trade, Industry, and Tourism, Luis Carlos Reyes, suspended the trade agreement with Brazil that allowed the import of vehicles without tariffs.
The main aim of this move is to review and strengthen the national automotive production sector, especially concerning electric vehicles.
Ecuador
In May this year, the Free Trade Agreement (FTA) with China came into effect, marking the start of tariff-free exports and simultaneously opening the door for new investments in electric vehicles.
From this year onwards, the tariff of 2.7% will be progressively reduced annually until it reaches 0% over a period of 15 years, by 2038.
Previously, electric vehicles entering from China faced a 40% tariff.
Notably, with the FTA in place, Chery announced its entry with a batch of 69 vehicles, valued at approximately $883,846.
Publicly disclosed reports indicate that the Asian automaker intends to export more than 6,000 vehicles to Ecuador, with a total estimated value of $83 million.
Cai Wenwen, Chery’s representative, announced that around $21,000 will be saved for each vehicle exported to Ecuador.
This reduction in costs could lead to more affordable prices for Ecuadorian consumers, thereby democratizing access to new technologies.
How does this agreement impact the daily automotive market?
While Ecuador has become an ideal setting for the consolidation of Asian automakers, Jorge Burbano, Country Manager at BYD Ecuador, believes that the FTA does not have a significant impact on the day-to-day operations of established automotive companies.
“With the Free Trade Agreement, BYD Ecuador itself has not changed much because electric vehicles have long been exempt from VAT and tariffs. The same applies to batteries and chargers,” he notes.
Mexico
The trade agreement between Mexico, the United States, and Canada (USMCA) plays a key role in the country, offering tariff advantages and favourable regulations for electric vehicles.
This not only reduces import and export costs but also allows Mexican companies to offer more competitive prices in the global market, fostering a conducive environment for electric vehicle production in North America.
Peru
Recently, Peru and China updated their Free Trade Agreement following a visit from Peruvian President Dina Boluarte, with the aim of attracting new investments to the country and becoming part of the global electric vehicle supply chain.
Although the points discussed are not directly related to electromobility, Chinese automakers play a key role in the Peruvian market, providing models and prices that fit customers’ budgets.
Chinese brands such as BYD, Geely, Keyton, King Long, and JMC are contributing to diversifying the electric vehicle offering, providing more affordable options.
Notably, 35% of electric vehicle sales are from Chinese brands.
In fact, there is speculation that Peru might become part of BYD’s logistics chain, the world’s leading Chinese electric vehicle manufacturer.
“Our country has all the necessary materials to manufacture a car, such as copper, zinc, and steel, which we export and then receive back in the form of cars,” explained Karsten Kunckel, President of the Automotive Association of Peru (AAP).
How do they plan to participate in the logistics chain? By producing wiring and supplies for the automotive sector, rather than only exporting raw materials.
