February 29, 2024

To reduce the price of the “people’s car” to R$60,000, the government wants help from the states; understand

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Initial intent for products in the range of R$45,000 to R$50,000 has been proven useless.

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One of the most anticipated announcements in the package of measures for the industrial sector, which the government must make next Thursday (18), at an event in the Federation of Industries of the State of São Paulo (Fiesp), is the announcement that provides for a reduction in car prices. The difficulty is to come up with an equation for some of the models to be offered in the range between R$50,000 and R$60,000.

The initial intention, for products in the range of R$45,000 to R$50,000, proved unfeasible. The goal now is to get at least one model for around R$55,000, according to people familiar with the matter who Estadão has heard.

For this, the government is also trying to engage the states with cuts to the ICMS, a measure that would add to the reduction of the IPI (federal tax) and profit margins for automakers and dealerships.

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The package must include subsidized interest for financing and longer installment terms.

The use of part of the worker’s FGTS as a kind of “guarantee fund” in the event of default is also being discussed. Automakers cite high interest rates as the main impediment to sales.

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Auto entry?

There are also measures to reduce the price of cars up to R$100,000, which are outside the segment known as “blockbuster” (or “entry”). The two cheapest models on sale today are the Renault Kwid and the Fiat Mobi, both for R$69,000.

Another action should be made for the benefit of several sectors of industry, in addition to the automotive sector.

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The organizers of the event in Fiesp are awaiting confirmation that President Luiz Inácio Lula da Silva will be present for the announcement. In his absence, the speaker will be Vice-President and Minister of Development, Industry, Trade and Services, Geraldo Alcmene.

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The opening will be attended by Finance Minister Fernando Haddad, BNDES President Aloisio Mercadante and Fiesp President José Gómez da Silva, according to the preliminary agenda that Estadão had access to.

Industry hope

The auto industry hopes the measures will help restore sales in the sector, which have been declining or stagnant since the start of the pandemic.

Many companies have temporarily suspended production and given employees mass vacations or reduced shifts to match production with demand.

The head of Anfavea, the automakers’ association, Márcio de Lima Leite, says the entity is not at the forefront of this discussion, which some automakers have been conducting with the help of Fenabrave (which represents the franchisees). “But whatever is being done to warm up the market is very welcome.”

The entity is in breach of such measures as withdrawing safety-related clauses and cutting emissions for lower prices. The alternatives mentioned by some companies are less complex multimedia systems, as well as simplified items such as upholstery, trunk liner, carpeting, etc.

Impact on the tram

Another measure that could be announced is the gradual return of the import tax on electric cars – which has been zero since 2015 – to encourage local production of these models, as well as flexible-fuel hybrids. However, this proposal is considered by the manufacturers as a delay for the country.

After the opening ceremony of the event, a discussion panel is scheduled to discuss the new industrial policy. There will be another committee on economic growth tax reform, in the presence of Bernard Abbey, Extraordinary Secretary for Tax Reform in the Ministry of Finance.

The program also anticipates three more panel discussions on deindustrialization, new challenges of geopolitics, financing for industry development and the promotion of small and medium-sized enterprises. Among the participants will be the Executive Secretary of the Ministry of Finance, Gabriele Gallipolo. The event will be closed by Governor Tarcísio de Freitas.