Port of Santos is a gateway for chinese cars, but import costs raise freight rates

The Port of Santos is one of the entry points for imported cars that are filling up vessels before tax rates increase further (Disclosure/ Ecoporto)

The large influx of electric cars from China to Brazil, particularly from BYD, has had a significant impact on products with lower added value due to a cascading increase affecting importers using Brazilian ports, such as Santos. Issues include rising sea freight costs, import taxes and transportation prices.

Imports increased in the first half of this year, as companies rushed to import vehicles before the new import tax rates took effect on July 1. The tax was raised to 25% for hybrid vehicles, 20% for plug-in hybrids, and 18% for fully electric cars, up from 10% for all three categories previously.

In July next year, these rates will rise to 30%, 28%, and 25%, respectively. In the same month of 2026, the rates will increase to 35% for all three types. Therefore, companies will try to ship as many cars as possible before the rates reach their peak. This results in full ships and less available space.

"Chinese automakers have seized the opportunity to shift operations and accelerate car shipments, using a lot of space on large cargo and conventional ships and occupying many containers, which drives up the cost of transporting other goods due to the lack of space on ships. When space is available, the cost is higher", explains logistics expert Lúcio Lage Rodrigues, also director of Process Log & Comex.

Rodrigues notes that the international freight cost for a container from China to Brazil was less than \$3,000 (approximately R\$16,300) at the beginning of the year and is now close to \$10,000 (around R\$54,500).

"Since import taxes are applied to the value of international freight, the costs increase even more. The impact is broad across all types of products, which will become more expensive in Brazil. Naturally, products with lower added value tend to be more affected due to a more significant percentage increase", he explains.

Sea freight costs are included in the base for calculating import taxes, which significantly impacts the final price of products, the logistics expert points out.

"It’s a cascading increase because there are several taxes and contributions. The rates remain the same, but the calculation base increases. In other words, the values of Import Tax (II), Tax on Industrialized Products (IPI), PIS/COFINS, Tax on Circulation of Goods and Services (ICMS), and the Additional Freight for the Merchant Navy Renewal (AFRMM) increase. As a result, the final price of products rises", he lists.

Solutions Wellington de Jesus Victoriano, vice president of the National Federation of Customs Brokers (Feaduaneiros), notes that despite the tax increases, there is currently no noticeable reduction in the importation of these vehicles.

"Not only the Port of Santos has been impacted (by the cascading effect of the increase), but others as well, such as the ports of Rio de Janeiro, Vitória in Espírito Santo, specifically the Vila Velha Terminal, and Suape in Pernambuco, among others. Generally, any logistical congestion is a bottleneck that affects the entire supply chain and can increase operational costs, as fluidity drives foreign trade and supports more business and profitability", he analyzes.

Rodrigues suggests possible logistical alternatives. "Look for routes with longer transit times, which tend to have lower prices. Another option could be to use alternative containers, such as a refrigerated container with the cooling system turned off (NOR), which generally has lower costs", he summarizes.

Situation benefits domestic industry The increase in import taxes on electric cars and the cascading effect on prices may also encourage domestic industry investment in this sector due to rising costs.

"We believe so. Importing is always a gateway to new technologies and improvements to existing ones. For example, some BYD models, a major Chinese electric car manufacturer, will be produced at the Camaçari plant in Bahia, marking a new era for the Brazilian automotive industry", states Wellington de Jesus Victoriano, vice president of the National Federation of Customs Brokers (Feaduaneiros).

Logistics expert Lúcio Lage Rodrigues believes this process will depend significantly on government actions, including incentives for automakers to come to the country. "This is a broader issue, but there may indeed be incentives in one form or another, though this is more of a global concern", he concludes.

Alignment In response, the Ministry of Development, Industry, Commerce, and Services stated in a note that the gradual reinstatement of import taxes on electric cars aligns with the government's policy of promoting the production of sustainable vehicles in Brazil.

"Incentives are present in the Green Mobility and Innovation Program (Mover), launched in December 2023. Mover encourages investments in new technologies and increases requirements for the decarbonization of the Brazilian automotive fleet of cars, buses, and trucks. Since its launch, automakers with factories in the country have announced investments of R\$130 billion", the text says.

Potential The ministry adds that, therefore, "the measure contributes to the generation of knowledge, employment, and income in Brazil, as well as leveraging the country’s potential in both installed production capacity and diversification of the energy matrix and sustainable automotive technologies – for example, the production of hybrid electric cars with ethanol, which is among the investments already announced by automakers".