Far beyond purchasing power: what is missing for the electric car to win Brazil

The global electric car market has its foot on the accelerator – and it looks like it won’t get out of there anytime soon.

Last year alone, sales of electrified vehicles (EVs), between hybrids and those entirely battery-powered, reached 6.2 million units around the world, according to data from the statistics agency S&P. Global Platts Analytics.

This represents 9% of car sales globally, and the modality continues on an upward trajectory: just two years ago, the brand was below 3%.

Here in Brazil, the scenario is still moving a little slower. Unlike consolidated markets, such as China, the United States and Norway, EVs have not been as popular with Brazilians as they could be.

According to data from the Brazilian Association of Electric Vehicles (ABVE), the country currently has an electrified fleet of 77,259 vehicles in circulation. Of these, almost half refer to last year, at the mark of 34,990 sold between January and December.

“Electromobility is already an inexorable and irreversible reality, in Brazil and in the world”, said the vice president of Light Vehicles at ABVE to CNN, Pedro Bentancourt. “The data indicate that our market is accelerating, especially among those with greater purchasing power.”

No wonder: today, the most affordable EV model is the E-JS1, from JAC in partnership with Volkswagen, which is around R$149,900. Amid the shortage of parts and chips, the value of the small hatch is equivalent to a medium sedan powered by combustion.

For now, only for those who can

In the view of experts, the reason for such a high floor lies in a tripod of factors: lack of government incentives, high dollar and manufacturing price, especially due to the worldwide shortage of semiconductor chips.

“Brazil, unlike China, the United States and Western Europe, has not developed so quickly, because, abroad, car electrification is strongly driven by governments. Here, we have other priorities as a State, and our politicians did not think that electrification was a phenomenon to be encouraged in the past”, explains Bentancourt.

It is a scenario that has changed. According to Eduardo de Souza, director of Infrastructure at ABVE and CEO of Electric Mobility Brasil, import taxes for EVs are zero and there is already a reduction in the IPI (Tax on Industrialized Products).

“But Brazil can still do more on the tax issue, namely in the IPI and ICMS (Tax on the Circulation of Goods and Services)”, he said.

“The big issue is the incentive. Brazil can and should encourage the purchase of vehicles through tax reductions for companies and exemption from taxes on the vehicle itself, and even sponsor a value to the consumer for the purchase. It exists in a very structured way in Europe and the United States.”

According to the Association, there are already bills in progress and policies worked together with the National Congress so that the reduction in the tax burden is possible, including for the “very light” class, which includes electric bicycles, motorcycles and scooters.

Another factor that weighs on the consumer’s pocket is the high dollar. According to Souza, the exchange rate has leveraged the price of EVs: “Since the beginning of the pandemic, with the real devaluing against the dollar and the euro, the cost of electrified vehicles has risen 35%”.

Given the shortage of semiconductors, a crisis that has been ongoing since the beginning of the pandemic due to disruptions in supply chains and global consumption patterns, the cost of manufacturing has skyrocketed. For now, according to the experts consulted, it is still a factor in the supply of EVs, even as some automakers, such as Tesla and General Motors, reported record profits last year.

One hand on the wheel

Once the turmoil in the economy eases, the EV market is expected to pick up speed. In Brazil, there are already moves to install national factories.

Chinese automaker Great Wall Motors, for example, said in late January that it plans to invest US$1.81 billion to produce electrified vehicles in Brazil over the next decade. The company took over a Mercedes-Benz factory in the interior of São Paulo on January 27 and should start operating for national production in 2023.

“From the point of view of foreign investment, Brazil continues to be a large country with attractive economic and political conditions”, analyzes Bentancourt, who is also a director at Great Wall Motors.

“It is the seventh largest automotive market on the planet, has a skilled workforce, solid supplier base, local engineering and first-rate development research. We have everything to develop first world projects here, there is no lack of interest.”

More traditional combustion vehicle manufacturers such as Ford, Toyota and Renault have also been moving to increase their EV fleet nationally and globally.

Renault foresees four electric models in Brazil by the end of the year, while Toyota, on the other hand, already anticipates that the electrification project may still take a while. By 2025, all models of the Japanese manufacturer should have an electrified version, but there is no estimate of when they will arrive here – and at what price.

The year 2025, by the way, is seen as the key to a greater diffusion of the electric car: “The prediction is that, in three years, the price of the battery will have fallen enough to make EVs economically viable”, said Bentancourt.

Despite the moves of automakers to shake up the electric market in Brazil, 2022 must enter a kind of limbo for the sector to advance.

A source from this market who preferred not to be identified told CNN that companies are still very unsure of making predictions for two combined reasons: on the one hand, the electoral scenario, which can greatly affect the economy in the coming months (for good or for the evil); on the other hand, companies in the sector are on hold, monitoring the future of investments and launches already announced, which may or may not be confirmed, but whose numbers are still uncertain.

The Brazilian Electric Vehicle Association itself does not yet have forecasts for this year’s launches.

The Brazilian charging station network is still sparse: according to ABVE, there are only 1,000 charging points in the country

energy infrastructure

But even as EVs become more common on the streets, the fact is that the grid of electric stations is still sparse. According to data from ABVE, there are only 1,000 charging points in the country.

“Brazil has continental dimensions, you can’t say that, with a thousand charging stations, we can serve all drivers well,” said Rodrigo Aguiar, energy efficiency specialist and founding partner of Elev, a company focused on the electric mobility market.

“There is a challenge of homogeneity: a good part of the electric stations, as well as the EVs, follows the concentration of income. As there are more drivers in the Southeast, it is natural that the electrical network is stronger there and that it is not interesting for a local energy distributor to install an electric station, with high investment and energy expenditure, on a road far from the consumption poles.”

Hence, a vicious circle is created. Without an expressive network of gas stations, it is not interesting, from the consumer’s point of view, to make the transition to the electrified model. Consequently, the low local circulation of EVs makes it difficult for distributors to strengthen the infrastructure network.

“Brazil, like most countries, is used to having the infrastructure first, so that the public can then buy an electric car. Within this vision, the automakers are doing their part, and even distribution companies have been looking for us to do some installation projects. Last year was very positive for the electric market, which indicates that more electric stations will appear there”, said Aguiar.

The sector’s optimism, however, sees another stumbling block: carrying capacity.

A consumer challenge, according to the expert, is the time it takes to fill the EV battery. “No one wants to wait 8 hours for the ‘tank to load’. There are already chargers capable of filling up to 80% of the battery in 15 minutes, but they require gigantic energy.”

“Installing an ultra-fast charging station inside a shopping mall, for example, is not just pulling two wires from the electrical panel. From an energy point of view, it is like installing a mall inside a mall, and this is very expensive, especially considering the current scenario in Brazil.”

With energy planning, tax incentives and the massive arrival of automakers on national soil, the sector provides a green light for the EV market in Brazil. But, at least for now, he’s a flashing yellow.

See the electric cars expected to launch this year