BYD investment in Brazil points to China’s wider LatAm plans
Chinese EV manufacturer BYD is building an industrial complex in Brazil, a country where EV sales are virtually nonexistent. It’s a far-sighted investment in a continent full of potential, an indication of the economic rise of the BRICS – and possibly a sign of the economic decline of the West.
BYD, the world’s largest manufacturer of EVs, will spend $600 million on a site in Bahia, a state in Brazil’s northwest, where it will build hybrid and full-electric cars, buses and trucks.
The investment will create more than 5,000 jobs. More importantly, it’s a massive win for Brazil’s president Lula da Silva, who seeks Chinese help to re-industrialize Brazil, and re-organize the global power balance, both economically and politically.
Both China and Brazil are members of the BRICS, an informal club of non-western economic powerhouses that also includes Russia, India and South Africa (hence the acronym).
Russia’s invasion of Ukraine, and the Western sanctions on Russia that have followed it, have given a new impetus to the idea of the BRICS as the nucleus of an alternative economic world order – to be clear: an alternative to the ¬Western-led economic world order.
Perhaps the Ukraine war merely accelerated what was happening anyway. Between 2000 and 2022, the share of global GDP represented by the G7 (US, UK, Canada, France, Germany, Italy and Japan, plus the EU) fell from 40% to around 30%. Meanwhile, BRICS increased their share from 18% in 2010 to 26% in 2021.
Both evolutions are due to the massive economic growth of China, which represents 70% of the combined GDP of the BRICS.
With that in mind, recent Chinese automotive investments in Brazil couldn’t have been more symbolic. They are literally filling the gap left by Western OEMs like Ford and Mercedes-Benz, both of which have exited Brazil in recent years.
BYD will open its factory in a plant abandoned by Ford. Great Wall Motors, which last year announced a $1.9-billion investment to build BEVs and HEVs in Sao Paulo state, is setting up shop in an old Mercedes-Benz plant.
All of which seems to confirm a wider trend in Sino-Brazilian relations: China is now Brazil’s largest trading partner, and it has been since 2009, when it overtook, who else, the United States.
Yet at first sight, there isn’t much of a market in Brazil for these Chinese EV manufacturers: in Q1 of 2023, less than 600 EVs were sold across the country. But BYD and its fellows are counting on the longer term – and on the broader market.
Growing middle class
Brazil’s domestic market is 203 million consumers strong. Only 50% of households have a car, but with a growing middle class, that figure looks set to increase.
As electrification takes hold across the world, many will have an EV as their first vehicle. In many cases, that will be an EV from one of the Chinese brands, whose many modestly-priced models are better suited for middle-income markets like Brazil.
It is likely that BYD, Great Wall and other Chinese OEMs manufacturing locally will use Brazil as a launching pad for other markets across South America, notably Argentina and Colombia.
In so doing, the automotive industry could prove one of the main methods for tying Brazil in particular and Latin America more generally to China – economically in the first place, geopolitically in the second.
Again, it is a change that is perhaps already happening. For instance, it was notable that of the countries that supported the West’s sanctions against Russia, exactly none were in Latin America.
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