Chinese electric car manufacturers, including BYD, are reportedly increasing shipments to Brazil and Mexico in preparation for tariff hikes in Brazil and trade restrictions imposed by the United States and its allies, according to Nikkei Asia.
Following Washington’s announcement on Tuesday (May 14) of a tariff increase on Chinese electric cars from 25% to 100%, it is expected that the United States and its allies will implement further trade restrictions on the Chinese electric car industry.
On the other hand, Brazil has changed its tariff-free policy on electric cars, which has been in effect since 2015, due to a significant influx of Chinese electric cars. This year, Brazil began imposing tariffs on electric cars, with full electric cars subject to a 10% tax rate since January, which will increase to 18% in July and further to 35% by July 2026.
According to a shipping industry source, the rush for shipping Chinese electric cars to Brazil and Mexico started in March and is expected to continue until June.
Data released by the General Administration of Customs of China on Thursday (May 9) showed that China’s exports to Brazil increased by over 20%, with the overall trade volume between China and Latin America growing by 8% year-on-year to reach $161 billion. The fastest-growing exports include cars and electronic products. In the first four months of 2024, China’s car exports increased by 21% compared to the same period in 2023.
The data indicated that despite the increase in exports in April, prices remained stable. China’s exports continue to rely on low prices for progress, partly influenced by a further weakening of the yuan.
In recent months, overall shipping costs from China to Brazil and Mexico have skyrocketed. A source mentioned, “Since late March, shipping container prices on the China-Brazil route have increased by 4 to 6 times. Earlier this year, container prices were around $1,500, but now they exceed $6,000.”
BYD’s data revealed that in the first quarter of 2024, its electric car exports surged by over 150% year-on-year to more than 97,000 vehicles, with 15,700 of them headed to Brazil, accounting for about 16% of the total export volume.
The Chinese electric car manufacturer is also accelerating the construction of its factory in Brazil to tap into the thriving local market, which is another factor contributing to the recent rise in transportation demand. BYD announced plans to establish a new factory in Mexico to further expand its presence in the local market.
However, Mexico is actively distancing itself from Chinese car manufacturers under pressure from Washington.
Three Mexican officials informed Reuters in April that the federal government of Mexico is refusing to provide low-cost public land or tax incentives for electric car production investments. They disclosed that senior Mexican officials stated after a meeting with BYD executives in January that they would suspend any future meetings with Chinese car manufacturers.
The Biden administration stated on Tuesday that if Chinese electric car manufacturers attempt to relocate production to Mexico to evade newly imposed U.S. tariffs, the government is considering additional punitive measures.