Advance of Chinese Automakers in Brazil Raises Concerns
The rapid expansion of Chinese automakers in Brazil is fueling debate over tariffs, competitiveness, and the impacts on the domestic industry.
In 2025, China further strengthened its position as the world’s largest vehicle exporter, shipping 8.3 million units, a 30% increase over 2024. This volume is more than double the 4 million vehicles exported by Japan, the second-largest exporter, which lost the top position two years ago.
This advance has triggered unprecedented changes in some of the world’s largest vehicle markets, accompanied by various protectionist responses in the form of tariffs. Although such measures may slow vehicle imports, they have not diminished China’s aggressive drive to export its surplus production to any country willing to accept it. Chinese manufacturers are also pursuing alternative strategies, such as exporting vehicles in knocked-down or semi-assembled form, as is currently happening in Brazil with BYD and GWM, among other manufacturers waiting to do the same. These strategies have accelerated the presence of Chinese automakers in Brazil, where several companies are testing different market-entry and production approaches.
Mexico is currently the clearest example of what happens when markets remain open to Chinese manufacturers. In 2024, China exported 485,000 vehicles to the Mexican market. In 2025, imports increased 29% to 625,200 units, making Mexico the largest buyer of Chinese cars in the world. In both years, GM led sales with Chevrolet models produced in its Chinese joint venture with SAIC.
However, the actual sales of Chinese vehicles in Mexico grew only slightly in 2025—just 1.2% over 2024, reaching 306,600 units and capturing 20% of the market, which totals about 1.5 million vehicles. This occurred because Mexico implemented measures to curb imports of cars from China.
The mismatch between imports and sales reflects a pattern similar to what is happening in Brazil: imports increased ahead of higher tariffs. Previously, tariffs ranged from 15% to 20% for countries without trade agreements with Mexico. This year, the tariff on vehicles originating from China was raised to 50%.
With the tariff increase on the horizon, Chinese manufacturers rushed to import more vehicles than they could immediately sell, building inventories at lower prices so they could continue to exploit the market with competitive advantages for some time—something they have also been doing in Brazil. This tactic has further intensified debate about the long-term competitive impact of Chinese automakers in Brazil.
Different Forms of Protectionism
The Mexican government, which has traditionally maintained a liberal policy and kept its market open to foreign trade, clearly yielded to pressure from multinational automakers operating in the country, many of the same companies that operate in Brazil and call for protectionist measures there because they cannot compete with Chinese manufacturers.
It is worth noting that Mexican protectionism is occurring in a country that is considered far more competitive for the automotive industry than Brazil, according to studies frequently presented by foreign automakers whenever they seek to highlight Brazil’s lack of international competitiveness. In Mexico’s case, however, even this favorable environment has not been enough to contain Chinese competition.
It should also be noted that Mexico’s protectionist response to the influx of Chinese vehicles is even stronger than Brazil’s measures. Years ago, Brazil reduced the 35% import tariff to zero for electric and hybrid models. Since 2024, however, the government has begun restoring the tariff. By July of this year, the rate will return to the maximum allowed by the World Trade Organization (WTO) for assembled or semi-assembled SKD vehicles. For vehicles imported as fully disassembled CKD kits, the tariff is scheduled to rise to 35% in January 2027.
Although Mexico and Brazil are similar markets, their circumstances differ. Brazil’s market is larger and historically more protected. Imports of Chinese vehicles, while growing significantly in recent years, still represent less than 10% of the market. Even so, the rapid expansion of Chinese automakers in Brazil is prompting policymakers and industry leaders to reconsider the long-term structure of the country’s automotive sector.
In 2025, 187,300 Chinese vehicles were registered in Brazil, a 55.6% increase over 2024, but they accounted for only 7.3% of the total 2.55 million light vehicles sold. As in Mexico, however, imports have been accelerated to avoid higher tariffs. Shipments have far exceeded actual sales, and Brazil became the fifth-largest buyer of vehicles produced in China, importing 322,100 units, behind Mexico, Russia, the United Arab Emirates, and the United Kingdom, and slightly ahead of Saudi Arabia, Belgium, and Australia.
The Mexican Model Would Be Disastrous in Brazil
Unlike Brazil, Mexico has historically been far more open to vehicle imports, signing tariff-exemption agreements with numerous countries, including Brazil. This is largely because manufacturers in Mexico export most of their production to the United States and Canada, tariff-free under the USMCA trade agreement.
To illustrate the scale: manufacturers operating in Mexico produced 3.9 million vehicles in 2025, of which 3.4 million were exported. These volumes far exceed the domestic market of roughly 1.5 million units per year. Mexico’s supplier base is relatively limited, and vehicles are assembled using large quantities of imported components in facilities commonly known as maquiladoras.
With this export-oriented structure, Mexico can afford to keep its domestic market open to importers, particularly because internal sales volumes are not large enough to justify building factories solely to serve the Mexican market.
This landscape became even more constrained after the United States imposed a 100% tariff on cars imported from China, including those produced in Mexico with imported components. It is therefore no coincidence that BYD concluded that this configuration did not align with its business model and, at least for now, abandoned plans to invest in a manufacturing facility in Mexico.
Brazil, by contrast, exports less than 20% of its vehicle production, primarily to Latin American markets—including Mexico, where it is now losing ground to Chinese competitors. Consequently, the Mexican model would be far more destructive to Brazil’s automotive industry, particularly to the supplier network that has been developed over decades of localization.
China Adapts to Brazil
For the time being, Chinese manufacturers cannot afford to forgo the Brazilian market, which remains one of the largest in the world, still open to their vehicles. They continue to face significant production surpluses that must be exported.
Even as they are compelled to localize some production to mitigate rising tariffs in Brazil, they will not stop importing part of the vehicles they sell in the country. Instead, they will assemble the models with the highest sales volumes locally.
Over the next five years, Chinese automakers in Brazil are expected to “Mexicanize” Brazilian production, using large quantities of imported components from China, whether through individual parts shipments or through SKD and CKD kits.
One method for meeting minimum local-content requirements will involve assigning imports of components to captive suppliers from China, which will be established in Brazil.
Through these arrangements, Chinese vehicle manufacturers are likely to maintain their competitive advantage in Brazil, while making only a limited contribution to the domestic automotive supply chain. This is the outlook currently visible, although it remains subject to change as domestic industry pressure increases from manufacturers that struggle to compete internationally and are losing ground in the domestic market.
