A delay in agreeing regulation for Brazil’s vehicle technology and supply chain incentive scheme (Inovar-Auto) has prompted the government to extend by a further two months the temporary clearance of those companies that have already joined the programme, which was supposed to have started by March 31.  By Barry Cross

To date, 37 companies have joined the scheme, which provides tax breaks for suppliers who invest in technology associated with automotive production and operations in Brazil. Combined, these companies intend to invest more than $2 billion, according to the Ministry of Development, Industry and Overseas Trade.

Consumers in Brazil are already enjoying falling prices as a result in the reduction of import taxes on automotive products covered by the scheme.

The temporary extension will continue to allow supply companies to take advantage of tax benefits established under the scheme, which will eventually have rules in place to measure the energy-efficiency and local content of automotive parts. By 2017, the government expects investment of more than $2.5 billion to have been made and for production to have increased from the current level of 3.3m vehicles to more than 4m.

According to the Secretary of State for Production Development, Fernando Pimentel, the fact that 47 companies have so far sought qualification shows the success of the scheme, which he says is generating more investment in Brazil to allow the production of safer and more fuel-efficient cars.

He also pointed to new production facility projects that are to go ahead, these being by Chery at Jacarei (São Paulo state), JAC Motors at Camaçari (Bahia) and Nissan at Rezende (Rio de Janeiro). At the same time, Mitsubishi Motor Company has announced that it is to start production of ASX and Lancer models in the country; these vehicles are currently imported.

Despite the advantages of Inovar-Auto, sources have said that some manufacturers are still having to import vehicles over and above agreed quotas and are not able to sell these at reduced rates, which means that the new tax advantages cannot yet be passed on to consumers. In many cases, the manufacturer has to average out prices between those vehicles that are able to be sold at cheaper prices with those that are more expensive.