Ciro Possobom, CEO of Volkswagen Brazil, emphasized the importance of local manufacturing amid pressure from Chinese automakers like BYD for reduced import tariffs. In an interview with Brazil Journal on August 1, 2025, he warned that favoring the assembly of imported vehicles with foreign parts could devastate Brazil’s production chain. The statement followed the government’s decision to reject BYD’s tariff reduction request but grant a temporary quota for importing finished or semi-knocked-down electric vehicles at zero import tax. Possobom, alongside other automaker CEOs, signed a letter to President Lula expressing concerns over unfair competition. Despite Volkswagen’s 39 factories in China, the company prioritizes generating jobs and wealth in Brazil over importing vehicles.
The government’s move balances the push for electrification with protecting local industry. The temporary quota allows limited imports but falls short of Chinese automakers’ demands. Brazil’s automotive sector, accounting for roughly 20% of industrial GDP, faces challenges in transitioning to electric vehicles.
- Key points from Possobom’s interview:
- Favoring imports threatens local suppliers.
- Volkswagen aims to invest in Brazilian production, not just sales.
- The company seeks competitiveness while preserving jobs.
Volkswagen’s strategy in Brazil
Volkswagen bets on local production as a competitive edge. Possobom noted that the company could import vehicles from China, where it has a strong industrial presence, but chooses to maintain factories in Brazil to bolster the economy. Plants in São Bernardo do Campo, Taubaté, São Carlos, and São José dos Pinhais employ thousands and support a vast supplier network.
The CEO highlighted recent investments, including factory upgrades for hybrid and electric vehicles. In 2024, Volkswagen announced R$7 billion for 2023-2028, focusing on sustainable technologies.
- Volkswagen’s investments in Brazil:
- R$7 billion by 2028 for new models and tech.
- Hybrid engine production in São Carlos.
- Battery assembly expansion in Taubaté.
- Partnerships with universities for EV research.
This approach underscores concerns about economic sustainability. Importing finished or semi-knocked-down vehicles cuts short-term costs but undermines long-term industry competitiveness.
Government response to industry pressures
On July 31, 2025, the government introduced a temporary quota for importing electric and semi-knocked-down vehicles with tax exemptions. The measure aims to make EVs more affordable but stops short of BYD’s broader tariff cut request. The decision is a partial win for local automakers like Volkswagen, Stellantis, GM, and Toyota.
The letter to President Lula, co-signed by Possobom, argued that tariff reductions for imports would harm local investments. Facing pressure from Chinese automakers and the need to lower EV prices, the government chose a middle ground.
The import quota, valid until 2026, caps units per company. This gives local automakers time to ramp up EV and hybrid production as the market adapts to the energy transition.
Chinese competition and BYD’s criticism
BYD, set to build a factory in Camaçari, Bahia, has intensified competition in Brazil. In July 2025, the Chinese automaker criticized rivals like Volkswagen, Stellantis, GM, and Toyota for “outdated technology and lazy design.” Possobom, without naming BYD, countered that Volkswagen focuses on innovation and quality tailored to Brazil’s market.
BYD’s Dolphin and Song Plus models lead EV sales in Brazil. The company plans local production by 2026 but relies on imports to meet current demand. The government’s tax-free quota benefits BYD but doesn’t address long-term tariff issues.
- BYD’s competitive advantages:
- Lower prices for electric models.
- Advanced battery technology.
- Aggressive global market expansion.
- Marketing centered on sustainability and innovation.
The clash between traditional and Chinese automakers mirrors global trends. In 2024, BYD outpaced Volkswagen in EV sales in China, but Volkswagen retains leadership in Brazil with models like the T-Cross and Polo.
Impact on Brazil’s supply chain
Importing finished or semi-knocked-down vehicles threatens Brazil’s supplier network. According to Anfavea, the automotive sector generates about 1.3 million direct and indirect jobs. While batteries, engines, and electronics often rely on imports, bodywork, interiors, and other components are largely produced locally.
Possobom warned that assembling imported vehicles reduces demand for local parts, hitting small and medium-sized enterprises. Volkswagen works with over 400 suppliers in Brazil, mainly in São Paulo and Paraná.
- Brazil’s automotive supply chain data:
- 20% of industrial GDP from the auto sector.
- 1.3 million jobs created directly and indirectly.
- 60% of vehicle components made locally.
- Sector exports reached $8 billion in 2024.
Protecting local industry is a challenge for the government, which must balance competitiveness with the shift to electric mobility. The temporary import quota is a short-term fix, but the future hinges on incentives for local EV production.
Volkswagen’s future plans
Volkswagen aims to launch new electric models in Brazil by 2027, including localized versions of the ID.3 and ID.4. The company is also investing in charging infrastructure, partnering to install stations along highways. Possobom stressed that the EV transition requires planning without jeopardizing local industry.
Addressing Donald Trump’s 2025 tariffs on Brazilian vehicle imports, Possobom said Volkswagen is accelerating cost cuts to stay competitive in the U.S. while maintaining investments in Brazil.
The company remains committed to sustainability, targeting carbon neutrality by 2050. In Brazil, 90% of factory operations use renewable energy, and recyclable battery production is under study.
- Volkswagen’s future plans:
- ID.3 and ID.4 EV launches by 2027.
- Expansion of charging stations with energy partners.
- Cost reductions to counter international tariffs.
- Focus on recyclable batteries and renewable energy.
Brazil’s electric mobility debate
The shift to electric vehicles is gaining traction in Brazil, but high prices limit adoption. In 2024, EVs accounted for just 2% of new vehicle sales, per Anfavea. The zero-tariff import quota may lower costs, but inadequate charging infrastructure and limited incentives for local production remain barriers.
Volkswagen advocates for long-term policies, such as IPI tax exemptions for locally made EVs and funding for battery research. Possobom believes Brazil could become an EV hub if local industry is preserved.
The rivalry between traditional and Chinese automakers is set to escalate. While BYD pushes aggressive pricing, Volkswagen banks on quality, local production, and brand trust in Brazil.