By Waldaniel Amadis | 2024-11-28

SÃO PAULO -- Chinese made-electric vehicles (EVs) are clogging up ports and bringing security risks even as some Chinese state-owned automakers flounder.

One such company, JAC Motors, has seen its fortunes turn as it shifted toward EVs in Brazil.

In 2011, the company simultaneously opened 50 dealerships across Brazil's major cities and promised the establishment of a Brazilian factory, aiming to break the stigma and prejudice associated with earlier Chinese brands like Lifan, Effa, Chana and Towner.

The latter brands entered the Latin American market with low-cost vehicles but fell short on quality and a lack of after-sales service and spare parts, damaging their reputation.

JAC Motors achieved 23,723 registrations in its first year, with the J3 model leading its sales, Automotive specialist Vinicius Hozara, founder of the popular Brazilian YouTube channel Meu Carro LifeStyle, told Entorno, citing data from the National Federation of Motor Vehicle Distribution (Fenabrave).

Despite an ambitious debut, JAC Motors saw registrations drop to 18,042 (-23.9%) after just one year.

This decline worsened in subsequent years from a lack of spare parts and the unfulfilled promise of establishing a Brazilian factory, Hozara said.

By 2022, the brand shifted its focus in Brazil solely to EVs, increasing registrations from 930 in 2021 to 1,237 in 2022.

In 2023, JAC Motors continued to concentrate on EVs including utility models and small trucks, but sales continued to fall, closing the year with only 811 registrations and five dealerships -- just 10% of the network JAC Motors had when it entered the Brazilian market.

The arrival of Chinese electric car competitors BYD and GWM in 2023 further impacted JAC Motors' sales, according to Hozara, who noted that the brand's "cost-benefit ratio is low" and criticized its popular electric model, the e-JS1, for poor safety.

JAC Motors has enjoyed a modest recovery this year with 1,471 registrations so far, data from Fenabrave through October show.

Chinese EVs in Brazil

Chinese EVs in Brazil present a complex mix of economic opportunities and strategic risks in Beijing's relationship with Latin America, according to a September 19 analysis by the Washington-based Center for Strategic and International Studies (CSIS).

This growth is seen as a crucial element of China's geopolitical strategy, particularly in the context of strengthened ties with Brazil following the opening of its market to Chinese companies.

In the short term, the excess inventory of EVs at Brazil's ports has led to congestion and increased transport costs for other industries.

Chinese electric cars, which have been piling up in Brazilian ports for months --similar to the situation in some European ports -- are facing delays due to declining sales and China's effort to maintain industrial output despite weaker domestic demand.

However, demand in international markets has also slowed.

Brazil raised taxes on electric cars from 10% to 18% in the first half of this year, with plans to increase them to 35% by 2026, Infobae said in an October 14 report.

To avoid this hike, China expedited shipments before July, resulting in an excess of vehicles at key Brazilian ports, including Santos, the main entry point for electric cars, particularly those from BYD.

"This [strategy] drives up the cost of transporting all other goods, as available space on ships is limited, and when space is found, the price is higher," explained logistics watcher Lúcio Lage Rodrigues in an October interview with Tribuna.

Moreover, Brazil's limited charging infrastructure, combined with the high cost and rapid depreciation of Chinese EVs, is dampening demand in the local market.

Security risks

Beyond logistical and economic challenges, concerns are growing over the long-term risks of Brazil's reliance on high-tech vehicles.

In terms of security, the potential for remote manipulation of software embedded in EVs poses significant cybersecurity and espionage threats, a concern raised by the US Department of Commerce.

Connectivity technologies in these vehicles -- such as the Global Positioning System, microphones, cameras and other sensors -- could be exploited to collect sensitive data, sparking worries both in the United States and in certain sectors in Brazil.

"It doesn't take much imagination to understand how a foreign adversary with access to this information could pose a serious risk," said US Commerce Secretary Gina Raimondo in a statement on September 23.

Additionally, Chinese state-owned companies control much of Brazil's electric transmission infrastructure, which will have a significant impact on the country's EV charging network.

Increased demand for charging stations will only deepen Brazil's dependence on Chinese firms, enabling them to dominate a vertically integrated market, according to CSIS.