Draft incentive law includes hybrids like Toyota Prius but not EVs or PHEVs

Draft incentive law includes hybrids like Toyota Prius but not EVs or PHEVs

Long awaited, the expected fiscal incentive for production and sale of hybrid cars here in Brazil has finally reached draft stage. Yet there was a bit of a surprise: plug-in hybrids and pure EVs are not included.

The official rationale for this is based on predicted electricity peak consumption. The enduring drought that has lowered reservoir levels at the hydro-electric power plants and forced the country to generate using other fuels at full capacity which risks some degree of supply grid breakdown. 

However, independent experts on power generation do not agree with this view.

Sales of EVs are extremely low due to their high prices, as all are imported.

The decision to exclude PHEVs and EVs from incentives is most likely due to the coming presidential election with the government taking a purely political decision in the meantime, perhaps to review its thinking later.

As of now, only hybrids with combustion engines fitted to help recharge the battery pack and with no plug-in facility, will qualify for an incentive under the draft proposal. Toyota's Prius, the Lexus CT 200h and Ford's Fusion hybrids are already sold here - none have a plug-in alternative.

The newly-launched BMW i3 range extender will not be granted any incentive at all - the pure-EV version is not sold in Brazil.

Import duty will be slashed from 35% to zero, 2%, 4%, 5% and 7% depending on car energy efficiency.  The stimulus will last until 31 December, 2015 when another incentive negotiation round is expected, including for models made in Brazil, and including plug-in hybrids and EVs.

Although nothing has been implemented so far, Toyota is waiting for a final ruling to decide whether or not to produce the Prius in small volumes at its manufacturing plant in São Bernardo do Campo, greater São Paulo region. Currently only components to supply its three manufacturing units in the Mercosur region (two in Brazil and one in Argentina) are produced.

The expectation is that phase two of the duty cuts will include internal combustion, petrol/ethanol flex-fuel engines plus hybrids and extended-range electrics.

Toyota has discreetly admitted it will support this option if legally required, because it makes sense in terms of a reduced tax burden.