Brazil’s auto industry has been split down the middle over the government’s generous import subsidies, which have been designed to encourage the purchase of new vehicles. The subsidies, which began in 2014, provide incentives of up to 35 percent of the purchase price of a new car or truck, up to a maximum of R$45,000 (~$11,400).
However, domestic car manufacturers contend that the subsidies are unduly generous and have resulted in an influx of imported vehicles, which they claim have disrupted the local market. Local automakers argue that the influx of imports has upset the delicate balance of supply and demand, leading to a sharp decline in sales of domestically produced cars.
At the same time, importers and consumers have welcomed the subsidies, which have been credited with helping to boost sales of imported vehicles by 40 percent since the scheme went into effect. Supporters of the scheme assert that it has done much to stimulate the local economy, increasing consumer spending and creating thousands of jobs.
The debate over the import subsidies has reached a fever pitch, with representatives from both sides of the industry lobbying hard for their respective causes. The Ministry of Industry, for its part, has argued that the scheme has been instrumental in providing Brazilian consumers with access to the latest models at a much more affordable price.
The Ministry of Finance, meanwhile, has backed the subsidies, saying that they will help to reduce the cost of vehicle ownership and reduce the cost of car-related taxes.
However, with the import subsidies due to end in 2019, the government is under pressure to reach an agreement that will satisfy both sides of the industry. Until then, the debate over the import subsidies will continue to divide Brazil’s auto industry.