What next, for Chinese cars in Brazil?
Published September 23, 2011
Brazils new tax plan to control the rush of imported cars into South Americas biggest auto market could potentially put a damper on JACs plans to take on the market in a major way. New legislation from the Brazilian government sees taxes on cars imported from outside the Mercosur trade union raised to 30% which will have a serious effect on imported cars.
The company that is likely to be most affected by the tax hike is of course JAC, the Anhui based car maker has yet to establish a factory in the market, although they do have plans to do so. Chery have already set up a joint venture factory in Brazil and seems to be doing quite well with its Chery Tiggo SUV and Chery A1 hatchback.
The official legislation states that automobile manufacturers must source 65% of the parts used in their locally produced cars must come from within the Mercosur Union (Argentina, Brazil, Paraguay and Uruguay), manufacturers must leave at least 0.5% of the returns must be invested into research and development within the country and lastly at least six steps of the cars assembly must happen within Brazil in a bid to cut down on CKD operations or screwdriver factories as they have become more commonly known as.
JACs export sales to Brazil have been very strong with over 27,000 vehicles leaving China for Brazil and with JAC taking an impressive 0.92% of the market and 14th place in terms of sales, JACs sales goal was initially 620,000 vehicles to Brazil over a ten year period starting from last year, however with the new tax JACs sales plans are likely to be derailed.