Industry Trend Analysis - A New Challenger For EV Hub Status - AUG 2017


BMI View: Argentina will challenge its Latin American rivals Mexico, Brazil and Colombia in the race to becom e a regional hub for electric vehicles after a large investment by Dongfeng Motor and proposed cuts to tariffs on electric vehicles.

Argentina is taking its first meaningful steps towards becoming an electric vehicle (EV) manufacturing hub with new investments into local production capacity and reported plans to lower import tariffs on EVs imported into the country.

In April, Chinese auto manufacturer, Dongfeng Motor, announced it will invest USD300mn into establishing the first dedicated electric vehicle plant in Argentina. The company has not yet confirmed whether it will produce cars, vans or buses at the plant, nor has it outlined the planned output capacity of the plant but it has confirmed that the vehicles manufactured will be battery electric vehicles (BEVs).

Argentina To Chase Rivals With Help Of Local Manufacturing
Electrified Vehicle Sales, Units
*Hybrid/BEV sales breakdown not available. Source: ANDEMOS, ANFAVEA, AMIA, BMI

We believe the local production of EVs is a strong move towards helping Argentina keep pace with regional rivals when it comes to the development of the EV market. Currently, Brazil boasts some EV production with China's BYD Auto having set up an electrified bus plant in the country with an annual production capacity of 1,000 units ( see ' BYD Investment Tackles Congestion From Growing Car Fleet ' , July 22 2014). While in Mexico, investments from Giant Motors towards the development of, and eventually mass production of, electrified light trucks by 2018 have put the country in a better shape for developing its own EV manufacturing base( see ' Autos Investment Round-Up: China A New Source Of Investment For Mexico? ' , April 5).

Incentives Key To Supporting Local EV Market

Dongfeng could also benefit from rumoured cuts to import tariffs on EVs if they are eventually officially applied by the Argentine government. According to reports by local newspaper La Nacion, the government is planning to lower import tariffs for EVs from 35% to 2% for BEVs and 5% for electric hybrid vehicles. This significant tariff cut will, however, only be applicable for a quota of 6,000 vehicles over a three year period, while only brands with domestic manufacturing activities in Argentina will be eligible for these incentives, and it is unclear whether tariff cuts will also be applied to EV components such as EV batteries and electric motors. These incentives are also not yet definite and the full policy is only likely to be officially announced in June later this year.

If brought into force, these incentives will bring Argentina more into line with its main regional neighbours in Latin America, thus, lowering the risk of the country becoming a regional laggard in terms of EV sales. Since 2016, the largest Latin American markets have been making positive steps towards creating a policy environment conducive to raising EV sales through lowering tariffs on EVs and EV products as in Mexico ( see ' Tariff Removal To Heat Up EV Competition ' , February 15) and lowering domestic sales taxes on EVs like in Brazil ( see ' Bright Spot Emerges In Desolate LatAm EV Market ' , January 18).