LatAm EV sector calls for more incentives

Brazil, Chile and Mexico are pushing electromobility, but they still have some way to go before the sector really takes off

Electric vehicle (EV) sales are starting to gain traction in Latin America, although the region is still a long way behind more mature markets such as the US and Europe. The electromobility sector hopes that governments implement more, and much-needed, incentives to boost a still embryonic industry.

EV adoption is slowly under way in the three biggest markets in the region — Brazil, Mexico and Chile — where demand for EVs rose in 2022, supported by higher fossil fuel prices, the availability of a greater variety of electric cars, scooters, motorbikes and buses, and higher domestic manufacturing.

Brazil's new hope

EV sales in Brazil continued their growth last year, rising by 41pc to 49,245 units from 34,990 in 2021, according to local electric vehicle association ABVE. Brazil's total EV fleet has reached more than 126,500 vehicles.

The EV sector is optimistic about the outlook for sales and investment, following Brazil's recent change in government. The previous government proved reluctant to push policies that would support growth in the EV sector. But the new administration regards EVs as a way to pump life back into the otherwise subdued overall growth in automobile sales and to revive one of the economy's most important industries.

Vice-president Geraldo Alckmin — who also serves as the development, industry and commerce minister — said at a ceremony hosted by ABVE this year that the EV sector has the potential to revitalise the country's industrial base through investments in technology and the green economy.

A recent study by Brazil's automobile manufacturers association Anfavea estimates that two-thirds of new vehicle sales in Brazil will be EVs by 2035, based on international trends for similar markets.

The increase in sales also comes as more EV models become available to consumers. Prior to last year, Toyota was the only automobile manufacturer producing EVs in Brazil. China's CAOA Chery started producing hybrid vehicles in Brazil in 2022, while China's BYD announced plans to invest 3bn reals ($580mn) in Brazil, including in vehicle manufacturing. Some market participants are also completing studies into starting EV assembly in Brazil from 2024.

But a more rapid sectoral increase also depends on the expansion of charging stations. ABVE estimates that Brazil ended last year with roughly 3,000 charging stations, up from 1,250 in February 2022.

Chile's progress

Chile has made significant progress in adopting electric buses for its public transport system, but has been slower to promote a wider take-up of electromobility.

"The development of various public-private strategies to promote zero and low-emission technologies is absolutely necessary to achieve the country's electrification goals," says national automobile association Anac. Chile needs to invest in charging infrastructure and develop incentives to encourage EV purchases, the association says.

Nonetheless, the number of registered zero and low-emission vehicles rose by 106pc in 2022 to 6,904 units, according to Anac. But sales of these types of vehicle still represent only 1.6pc of the national automobile market, despite the massive rise last year, Anac says.

"This is mainly explained by the increased supply of zero and low-emission vehicles available in the country, which reached more than 95 models in 2022," Anac says. There is also greater interest among individuals and companies to buy energy-efficient vehicles, it adds.

The association expects sales to double in 2023, and again in 2025.

Chile in October 2022 passed a law exempting EVs from paying annual road taxes for two years. The exemption covers 75pc of road taxes in years three and four, 50pc in years five and six and 25pc in years seven and eight.

Road taxes are based on a vehicle's value and are, on average, 65pc higher for EVs than internal combustion vehicles, which also have a lower price tag.

The government has promised to introduce more incentives for the consumer to buy EVs in new legislation.

Chile's national EV strategy aims to end sales of most internal combustion vehicles in 2035, when all sales of light and medium vehicles, public transport and major mobile heavy equipment, such as mine trucks, will be zero-emission. All sales of smaller mobile equipment used in the construction, agriculture and forestry sectors are to be zero-emission by 2040, and those of cargo trucks and inter-urban buses by 2045.

Mexico manufacturing boost

Mexico set big goals last year for a conversion to renewable energy, and its automotive industry kept up the drive by manufacturing more EVs, but the country made very little practical progress in electromobility.

President Andres Manuel Lopez Obrador said in July that his government was aiming for half of the total vehicles manufactured in Mexico to be either electric or hybrid by 2030. This statement seemed important in a country like Mexico, which manufactured 3.15mn cars and ranked seventh in world automobile production in 2021, according to data from the International Organisation of Automobile Manufacturers.

At the same time, several automakers announced plans last year to manufacture more EVs at their plants in Mexico. US giant General Motors has embarked on a $1bn reconfiguration of its Coahuila plant — the company's second largest in Mexico — to produce only EVs there from 2024.

Dutch group Stellantis announced in July last year that it will produce hybrid and full EVs in Mexico, although it did not provide further details, while Ford increased production of the electric version of its Mustang Mach car at its plant in the State of Mexico.

But Mexico exports most of its automotive production, including most of the EVs being produced in the country, as domestic sales of these types of vehicle remain at very low levels.

A total of 39,477 EVs were sold in Mexico in January-October 2022, according to the latest data from the country's automotive association Amia, just 0.7pc more than in the same period of 2021.

Mexico offers some fiscal incentives for EVs such as lower urban highway fares, an exemption to pay the tax on new cars and higher tax-deductibility than for internal-combustion cars. But Amia believes these are not sufficient and has called several times for a comprehensive public policy that includes more incentives for EV producers, consumers and charging infrastructure.

Mexico currently has around 1,146 charging stations, Amia says.

Brazil EV sales

Chile EV sales

Mexico EV sales