Brazil’s Auto Industry Hits a Bump – June Sales and Production Both Decline

While modest monthly declines can often be attributed to seasonality, June’s contraction in Brazil’s auto sector appears to signal more than just short-term volatility. Industry association Anfavea has emphasized that broader competitive dynamics and a fragile policy environment are weighing on manufacturers and distributors alike.

One of the most immediate pressures is the rapid influx of Chinese electric vehicles, led by automakers such as BYD. In the first half of 2025 alone, Brazil imported roughly 22,000 EVs from China, equivalent to nearly 8% of all light vehicle registrations in the period. A key enabler has been Brazil’s current import tariff of just 10% on electric vehicles—far below the 35% applied to most conventional vehicles. This has given imported EVs a substantial price advantage, unsettling Brazil’s domestic industry.

Although the government had previously announced a gradual increase in EV import duties through 2026, industry associations and labor unions are now lobbying for a faster hike. Their concern is not just about market share but also employment. Global automakers such as Stellantis, Volkswagen, and GM maintain major production facilities in Brazil, employing tens of thousands of workers. A continued flood of imports without matching local investment could threaten jobs across the supply chain.

This places Brazil at a critical crossroads. The government is committed to decarbonizing its transport sector and fulfilling international climate targets—particularly in the lead-up to COP30, which it will host. But this ambition must be balanced against the need to protect local manufacturing capacity. One potential compromise lies in foreign automakers establishing factories in Brazil. BYD, for example, has announced plans to build a plant in Bahia. However, until such projects materialize, the imbalance between import penetration and domestic production may persist.

As the second half of 2025 unfolds, the pace of regulatory adjustments and the actual progress of announced investments will play a pivotal role in shaping the sector’s trajectory. The auto industry is closely monitoring government actions on tariff changes, labor response, and how international players position themselves within the local ecosystem.

June’s figures serve as a warning for Brazil’s automotive industry. The country must navigate a delicate balance between embracing clean energy technologies and maintaining its domestic manufacturing ecosystem. As tariff decisions and investment commitments take shape, the outcomes will likely define Brazil’s position in the global EV supply chain for years to come.