Brazil grants BYD exemption from EV tariff hike, but not for as long as sought

Brazil announced a compromise in a dispute between Chinese EV maker BYD and traditional carmakers on Thursday, granting the company a short-term tariff break while moving forward with hikes that will hit it more aggressively in the long run.

Under the measure, BYD will be allowed to import up to US$463 million worth of semi-assembled electric and hybrid vehicles over a six-month period without paying import taxes. This tariff-free window will apply during the first half of 2026, offering short-term relief as BYD ramps up local production.

Separately, the government decided to bring forward a previously scheduled levy increase. The import tariff for electric and hybrid vehicle kits will now rise to 35 per cent in January 2027, a year and a half earlier than the original July 2028 timeline. Fully assembled vehicles will reach the same 35 per cent rate by July 2026, as previously planned.

BYD had requested a reduced tariff through mid-2026 to ease the ramp-up of its new manufacturing plant in Camaçari, Bahia State. The company, investing R$5.5 billion (US$978 million) in the facility, argued that temporary relief was necessary as it builds up its local production capacity.

But the proposal triggered an immediate backlash. In a joint letter to President Luiz Inácio Lula da Silva, the National Association of Automotive Vehicle Manufacturers, or Anfavea, warned that the exemption could put R$180 billion in planned investment at risk and eliminate as many as 50,000 jobs.