Government announces tax cut in order to reduce the price of popular cars
The federal government announced this Thursday (25) that it will reduce taxes in order to reduce the final price of popular cars by up to 10.96%. The measure will apply to vehicles with a final value of up to BRL 120 thousand.
The measures, according to the automotive sector, can make new popular cars cost less than R$60,000 again (see below).
Currently, the starting price of the brand new car is around R$68,000 – more than 50 minimum wages (today at R$1,320). This value does not consider measures announced this Thursday.
According to the Vice-President of the Republic and Minister of Development, Industry, Commerce and Services, Geraldo Alckmin, the reduction in the final price could be even greater: The government is considering allowing the direct sale of cars to individuals.
Today, direct sales are carried out only for CNPJs. The modality is used by rental companies and freight companies, for example, as it does not include logistics costs and concessionaires’ profits, for example.
Alckmin: ‘cheap cars will have tax breaks’
According to Alckmin, the discount will range from 1.5% to 10.96% based on three factors:
- the current value of the vehicle: the cheaper the car, the greater the tax discount;
- the emission of pollutants: the cleaner the engine and the production process, the greater the discount;
- the production chain: the greater the percentage of parts and accessories produced in Brazil, the greater the discount.
The actions were announced after a meeting between President Luiz Inácio Lula da Silva, Alckmin and representatives of the economic team with entities from the automotive sector at the Planalto Palace.
According to Alckmin, “the smaller the car, the more accessible it is, the greater the discount”.
“Today, the cheapest car is almost BRL 70,000. We want to reduce this amount. But the others will also be reduced. The smaller, more accessible, the greater the IPI, PIS and Cofins discount. The first item is social, it’s you serve this population that needs it more”, declared the vice-president, who is also minister of Development, Commerce, Industry and Services.
The Ministry of Finance will have a period of 15 days to adapt the decision to the fiscal rules – that is, calculate the loss of collection and say what the compensation will be in the budget.
After that period, according to Alckmin, the government will issue a provisional measure and a decree to regulate the issue.
Collateral law can make credit cheaper
Cars below BRL 60,000, predicts Anfavea
The president of the National Association of Automotive Vehicle Manufacturers (Anfavea), Márcio de Lima Leite, claims that the package makes it “very possible” that new cars will once again cost below R$ 60,000 at dealerships.
“The price, each automaker has its own policy. But the numbers that have been presented, it is very possible to have prices below R$ 60 thousand. Today, with the tax reductions that are under discussion and the joint effort of the entire sector, it is very possible that we have. But this is a question that each automaker, that each manufacturer, has its policy”, he declared.
- In recent days, representatives of ministries and the sector discussed possible alternatives to reduce prices.
- The executives stressed to the government that automakers already have very little profit margin on popular cars and that, therefore, it would be difficult to reduce prices at the factories. The margin, according to the companies, are higher in more expensive cars.
Government announces today measures to encourage popular car market
Stimulus to the industry
The government also announced measures of a general stimulus package for general industry. Proposals include:
- the adoption of the reference rate (TR) as an interest rate for research and innovation projects – which should make the industry’s efforts in these areas cheaper;
- R$ 4 billion from the National Bank for Economic and Sustainable Development (BNDES) for financing in dollars aimed at companies that work with exports – the dollar operation, according to Alckmin, serves as an exchange rate hedge.
Auto industry representative
This Wednesday (24), the president of Stellantis, Antonio Filosa, met with the Minister of Finance, Fernando Haddad, and stated, after the meeting, that the The auto sector is clearly suffering from high interest rates.
The company controls Fiat, Jeep and Citroen, among others, with a 33% share in the domestic market.
- Currently, the economy’s basic interest rate, set by the Central Bank to try to contain inflation, is at 13.75% per year, the highest level in six and a half years.
- The interest charged on car financing, however, is higher. According to the BC, the average rate of banks on this credit line was 28.6% per annum in March.
“Interest is difficult to resolve from one day to the next. But it is possible to think of mechanisms for accessing credit that could facilitate it. For example, improving the level of real guarantees, for example using some assets that the government has, and so forward,” said the Stellantis executive on Wednesday.
Questioned by journalists, he also assessed that “some kind of tax exemption is always welcome”. “A tax break would make the car cheaper. Clearly, there is a sacrifice automakers must make to generate more efficiencies,” he said.
Filosa also said that the price of steel has risen a lot in recent years, impacting the cost of automakers.
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