Nice post Unk. I know we've discussed this before, but do you feel there's any validity to the rumor that the Gen3 cars that will be built in Mexico are destined for Brazil primarily? I think for the deployment to be successful, not only would they need to be priced below $30k USD (or lower) but Tesla would need to build out the Supercharger network and service centers at a pace equal to or faster than the arrival of the cars. Does the potential audience have the capability to charge using just the base voltage available at home (which would help a lot while the supporting infrastructure is being put together)?
Would be interested on your and
@GhostSkater 's opinions on the matter. Brazil is a huge to date untapped market and the interest seems to be there...
The trade agreement between Mexico and Brazil differ from those Mercosur countries that are not vehicle exports and producers. There are defined limits on mexico exports of vehicles to Brazil. Periodic renegotiations alter the specifics but back in 2012 they actually agreed on a monetary value limit for Mexican vehicle exports to Brazil. In 2023 it was very interesting:
Starting on July 1, 2023, Brazil and Mexico will eliminate tariffs on heavy-vehicle trade as part of a bilateral economic agreement.
mexicobusiness.news
That probably resulted from the improving bilateral trade trade between them in recent years,
May 2023,
Brazil exported $924M and imported $511M from
Mexico.
The May 2023 trade balance was very positive for Brazil:
"In May 2023, the increase in Brazil's year-by-year exports to Mexico was explained primarily by an increase in product exports in
Semi-Finished Iron($34.1M or 7.83M%),
Cars ($14.2M or 53.4%), and
Forging Machines ($10.2M or 425%). In May 2023, the increase in Brazil's year-by-year imports from Mexico was explained primarily by an increase in product imports in
Computers($9.96M or 98%),
Scrap Aluminium ($5.65M or 110%), and
Oxygen Heterocyclic Compounds ($3.5M or 130k%)."
source:
Brazil (BRA) and Mexico (MEX) Trade | OEC
The net of all that is that while trade between the two two is rising and is very productive for both there is potential for very rapid disruption if there were a sudden increase in complete auto exports from either one to the other. Still the auto trade remains strongly positive for Brazil:
Starting on July 1, 2023, Brazil and Mexico will eliminate tariffs on heavy-vehicle trade as part of a bilateral economic agreement.
mexicobusiness.news
That all seems quite optimistic for Tesla to export from Mexico to Brazil. But...it is not quite so simple as that..
Large truck and bus manufacturers, notably Volkswagen, Mercedes-Benz and Marco polo have been adept at managing their Brazil-Mexico trade as well as in the rest of Mercosur and pretty much globally. They all are deeply invested in local content rules and optimization. Those practices are evident in the Brazil-Mexico large vehicle tariff agreement mentioned above. Relevant also is BYD growing impact in the BEV bus market.
So, specifically for Tesla what does all this mean? Factually the choices are clear and obvious.
Imported BEV's are still entitled to exemption from tariffs:
By Waldheim Garcia Montoya Sao Paulo, Mar 16 (EFE).- Continued subsidies for imports of electric vehicles are causing divisions within Brazil's automotive sector, with some insisting they be scrapped to boost local manufacturing and others defending them as a means of bolstering EV sales. Since...
www.laprensalatina.com
but were Tesla to suddenly, at long last, enter the Brazilian market they could do so with Chinese, German, US or Mexican production without duty. However, were Tesla to do that the howls of anguish from Stellantis, Mercedes-Benz, VAG and CAOA (producer/distributor/dealer of Hyundai and Chery and very influential Brazilian company which is one of few manufacturers which follow the Tesla direct sakes model, although they do not build under their own name). Since Volkswagen and Fiat are the two dominant brands in Brazil those howls will be heard. GM will howl loudly too, and their position in Brazil is a narrow third behind VW and Fiat, with dominant market for the Brazil taxi market as well as designing some GM. products for global production. Were Tesla to enter Brazil those manufacturers, already well positioned, will have their anguish very visibly and persuasively heard. After all, all but Caoa are already feeling the Chinese threat, which they really cannot fight.
Tesla, therefore, will not succeed without some careful and judicious planning. They will need to make investments in Brazil-sourced components, including mining and refining if they want to have Minas Gerais support (BTW, Fiat did that with stellar success), a crucial political factor.
Without question, if Tesla wish to import finished cars to Brazil from Mexico, they must take great care to avoid upsetting the trade balance between those countries. Volkswagen, presently importing some models from Mexico themselves, and Mercedes-Benz, which also has done that, have also exported vehicles from Brazil. Their huge investments in Brazilian manufacturing enhance their privileged positions. Stellantis is perhaps even stronger than the other two since Brazil is the largest Fiat market in the world, more than Italy, with some models designed in Brazil too.
Before this post becomes too long, the master point is that Brazil is an integrated manufacturers of vehicles with a huge supplier base. Success there is contingent on supporting that model. Mexico, by contrast is essentially an assembler (Maquiladora, essentially a duty-free zone that permits import of parts, assembly, reexport, all duty free). The same process does exist in Brazil (Manaus Free trade Zone) Google 'Manaus' to know why that marvelous place is impossible for auto manufacturing.
Perhaps that is too much information. However, since Brazil is by far the largest auto market Tesla does not serve and building in Brazil conveniently serves most of South America it seems quite relevant to Tesla interest now.
Of course I admit my bias, but that is, I think, hardly necessary. My own bias is perhaps stronger because of direct involvement in planning for two of the leaders in the Brazilian market. It's long past due for Tesla to enter Brazil.
suppressed the TSLA SP, now it is time for Banter Overhang
