National incentives for an all-electric fleet
National incentives and an increase in global EV interest have slowly changed the market. The South American average electric vehicle price decreased by over 5,000 U.S. dollars in 2022, partly due to the increase in available models in the region and to the relatively low battery prices. Despite this drop, Latin American consumers tend to be price sensitive. In this context, Brazil reported the highest electric vehicle revenue in 2022, and was also the Latin American country recording the largest passenger car sales volume across fuel types. However, despite its strong financial performance in the electric vehicle market, Brazil is still behind other countries in Latin America on other fundamental aspects of the EV market.The state of the electric vehicle market is intrinsically linked to national incentives to propel it further. Brazil reported the region’s most significant renewable energy capacity at just under 175,300 megawatts in 2022. However, most of its electric vehicle sales were hybrid electric vehicles, primarily powered by their internal combustion engine, as the government faced pressure from lobbies against its 2018 Rota 2030 policy to stop ICE vehicle sales by 2030. Despite these challenges, Brazil also boasted the largest plug-in electric vehicle market in Latin America, partly as many Brazilian states offered tax examptions for EVs, but still relies heavily on plug-in hybrid sales rather than all-electric vehicles. These import tax examptions will get progressively rolled back, which could impact the market. Mexico, second in the ranking for plug-in EV sales, offered varying private EV incentives depending on each Mexican state, and is attractive to electric vehicle manufacturers such as Tesla, which plans to open a Gigafactory in Nuevo León. In Colombia, the second regional leader in the sale of battery-electric vehicles (BEVs), financial incentives—such as lower taxes on EV imports and preferential parking—detailed in a 2019 law have promoted EV sales. The same can be observed in Costa Rica, where tax cuts for buyers described in a 2018 law have encouraged BEV sales.
A young market ripe for competition
The growth of the electric vehicle market in Latin America is also an opportunity for automakers to increase their visibility within the region. As the market leader, Toyota held nearly 33.6 percent of the hybrid and electric vehicle market in Colombia in 2022, while its market share in the overall Colombian vehicle market was around 25.6 percent. Toyota had similar success in Mexico, as the country’s leading six hybrid electric vehicle models were Toyota models.In contrast, the electric vehicle market in other countries of the region is a reflection of the broader passenger car market: In Chile, Maxus, Volvo, and Peugeot were the most popular plug-in electric vehicle brands, reflecting both the increase in the global EV market share of Chinese brands like Geely, Volvo's parent company, and SAIC, Maxus’ parent company, and Chile’s preference for Asian passenger car brands across fuel types. Argentina records similar results. Toyota was the leading passenger car brand in 2022, and three of the five best-selling hybrid and electric vehicle models in Argentina were Toyota-branded.
The emerging Latin American electric vehicle market presents opportunities for automakers aside from access to a wider consumer base. Chinese automakers are especially interested in the South American EV potential. Great Wall Motor, for example, invested in a new factory in Brazil, slated to start operations in 2024, and companies like BYD have also been gaining traction in the region. The raw material resources in the region could further attract EV manufacturers.
