EV sales rise in Latin America amid high fuel prices

  • Market: Electricity
  • 20/07/22

The region remains well behind other markets but is gaining ground, driven by government incentives and the high costs of conventional fuels

Electric vehicle (EV) sales in Latin America are soaring. The continent is starting from a low base and remains a long way behind more mature EV markets such as Europe, China and the US in both sales volumes and percentage terms. But sales figures for the first half of 2022 from Brazil, Chile, Colombia, Ecuador, Mexico and Peru show a strong if uneven growth, driven by a combination of factors — government incentive programmes, rising prices for conventional fuels, and a wider range of available EV models.

EVs accounted for a paltry 0.7pc of Latin America's total vehicle sales last year, compared with 20pc in Europe, 15pc in China and 4.5pc in the US, data from London-based Bloomberg New Energy Finance (BNEF) show. Brazil and Mexico are the region's biggest EV markets, despite relatively modest policy support, but even in these countries, EVs are only expected to reach 2pc and 4pc, respectively, of total vehicle sales by 2025, BNEF forecasts.

That said, current growth rates are striking. In Brazil, for example, sales of battery-run EVs (BEVs), hybrids (HEVs) and plug-in hybrids (PHEVs) jumped by 47pc on the year in the first six months of 2022 to 20,427, despite a 15pc year-on-year fall in overall vehicle sales, according to Brazilian electric vehicle association ABVE. The association expects Brazil's total EV sales, including hybrids,to top 100,000 in the coming weeks.

Beyond supra-national factors such as rising fuel costs, sales in Brazil have been boosted by an expansion of charging infrastructure and increased demand for low-emission vans and small trucks, for use as delivery vehicles by firms seeking to reduce their carbon footprint. As their popularity grows, Brazil is expected to have roughly 100 EV models available by the end of 2022. Domestic manufacturing is also picking up — Japan's Toyota is currently the country's only EV maker, but China's Chery and Great Wall Motors are planning to start EV production in Brazil later this year.

All this is happening without material government support. EVs still incur more federal taxes than internal combustion engine vehicles, ABVE president Adalberto Maluf told Argus previously. The association has repeatedly called for EVs to be taxed at the same rate as other vehicles, and urged greater integration between state, local and federal government on incentives for EV buyers.

Mexican growth

EV sales in Mexico have grown steadily in recent years, but represented only 0.5pc of total car sales in the country in 2021, BNEF says.

A total of 1,028 BEVs were sold from January-April, which is already 201pc higher than in the whole first half of 2021, data from the national statistics agency (Inegi) show. HEVs totalled 12,341, also above January-June 2021, and PHEV sales were 1,426 in January-April this year, also higher on the year but still not exceeding January-June 2021 levels.

Financial incentives for EV purchases are limited in Mexico, despite it being the second-largest regional market. It only offers some fiscal incentives for EVs, in contrast with other countries in the region where EVs are exempt from import taxes.

Colombian support

The expansion of EVs in Colombia has strengthened in gigantic steps supported by a package full of incentives and discounts for those who own a low-emissions vehicle.

Apart from tax incentives, EVs have an exemption from import taxes, discounts on the technical-mechanical yearly revision and pollutant emissions tax, and on their mandatory accident insurance premiums.

A total of 1,823 of BEVs were sold in Colombia in the first half of the year, well above 512 BEVs sold a year earlier, data from automotive association Andemos show. Even though BEV sales have increased almost every month of this year, only 164 BEVs were sold in June due to international logistics problems, data from automotive association Ademos show. HEV and PHEV sales totalled 10,618 and 1,315, respectively, both up by around 87pc on the year.

"Colombia is consolidated as a regional leader in the sale of electric vehicles, thanks to the electric mobility law, which introduced tax benefits and fewer procedures," minister of energy and mines Diego Mesa says.

Slower expansion

Even though Chile is well known for its extraordinary efforts to decarbonise its electricity sector, EV sales continue to increase at a slower pace than in Brazil or Colombia. A total of 443 BEVs were sold from January-May, data from transport association Anac show. That was still 124pc above the first half of 2021 but well below its neighbouring big markets. HEV sales continue to dominate the low-emissions vehicle segment with 896 sold during the same period, up by 41.1pc on the year, while PHEV sales rose by 200pc on the year to 231 units.

Chile plans to end sales of most internal combustion engine vehicles in 2035 under an electric transport strategy unveiled by the previous administration.

The growth of EVs in Ecuador is also tardy. Only 155 BEVs were sold in January-June this year, 50pc up on the year, data from domestic automobile association Aeade show. HEV vehicles continue to dominate the low-emissions vehicles market with 3,481 units sold during the same period, up by 133pc on the year.

The penetration of EVs into the market has been slow even though they have not been subject to value-added tax or import tariffs since 2019, while the consumption tax was included in the final price. The government late last year approved a tax reform that exempted all hybrid and EVs from the special consumption tax.

Peru's path

The already slower penetration of EVs in Peru could be threatened by government policies to encourage Peruvians to convert vehicles to natural gas because of the rising price of gasoline, shrugging off calls from the automotive sector to consider policies implemented in neighbouring countries to stimulate the EV market, especially for public transportation and heavy vehicles. "A series of incentives exist in the region that could be applied here," says Alberto Morisaki, who is in charge of economic research at the automobile association of Peru, AAP.

Sales of EVs in Peru reached a new high in the first six months of 2022 with 1,190 units sold, up by 135pc over the same period in the previous year, AAP data show. Hybrid vehicles accounted for the lion's share of sales, 1,055 units. This represented an increase of 120pc over the first six months of 2021. Following were PHEVs, with 73 sold, and BEVs, with 62 sold. While increasing, the number of electric vehicles remains low, accounting for 1.3pc of all vehicles sold during the six-month period.

President Pedro Castillo's government announced in June that it would cover the full cost of vehicle conversion, around $1,110, which would be returned to users over a period of three years.

The transport ministry reported that 22,197 vehicles were converted to natural gas in the first five months of the year, far surpassing the annual average since 2014 of 20,000 vehicles. The ministry forecasts that 70,000 vehicles will be converted this year.

Colombia EV sales

Mexico EV sales

Chile EV sales

Ecuador EV sales

Peru EV sales

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