Chinese invasion: how BYD and GWM overtook old Brazilian acquaintances

Chinese automakers like GWM and BYD are accelerating their dominance in the Brazilian automotive market. In just three years, they have risen from irrelevance to reach 7.2% of the national market in July, according to data from the National Federation of Automotive Vehicle Distribution (Fenabrave). This meteoric rise not only redefines the sector's competitive landscape but also places Brazil at the center of China's global automotive expansion strategy.

The speed of this penetration is impressive. GWM, with a 1.8% market share, already outsells brands like Peugeot and BMW, which have had factories in the country for years. BYD, even more aggressive, holds a 5.4% market share and ranks eighth in the national ranking, surpassing Renault, Nissan, and Citroën.

The Chinese strategy: local production to strengthen its presence

Previously essentially importers, both are investing in local production: GWM opened its factory in Iracemápolis (SP) on Friday (15) in the former Mercedes-Benz plant, while BYD operates in the Ford industrial complex in Camaçari (BA).

GWM: investment of R$10 billion by 2032 and focus on nationalization

GWM's factory in the interior of São Paulo is more than just a production unit – it's the brand's first operation in the Americas and the third outside China with full production capacity. The others are in Russia and Thailand. Investments of R$10 billion are expected by 2032.

The current facility has a capacity of 50,000 vehicles per year, producing three models: the Haval H6 hybrid SUV, the Power P30 pickup truck, and the Haval H9 SUV. The first model to roll off the production line was the H6, whose launch was attended by President Luiz Inácio Lula da Silva at the inauguration ceremony. Production of the other models is expected to begin in the coming weeks.

GWM's strategy goes beyond assembly. The company already employs 600 people, with a target of reaching 2,000 when it begins exporting to Latin America. It adopts a "piece-by-piece" system, ensuring domestic content from the first year, with 18 Brazilian suppliers already integrated into the production chain.

Automaker to open research and development center in the interior of São Paulo

At the inauguration, the automaker also announced the creation of a research and development center. According to Parker Shi, president of GWM International, the facility will have state-of-the-art laboratories for hybrid and electric systems, next-generation fuels, and artificial intelligence. Expected to be located next to the factory, it will employ 60 engineers and technicians.

"Brazil has talented engineers and top-notch universities. We want to leverage this potential to develop technologies not only for the local market, but for all of Latin America," adds Shi.

In addition, GWM will test its first hydrogen-powered truck in Brazil, starting in September, in partnership with universities such as the University of São Paulo (USP).

GWM admits to having a second factory in Brazil

GWM's plans for Brazil don't stop there. No sooner had the Iracemápolis plant opened than the automaker was already talking about a second plant in Brazil. For the period between 2027 and 2032 alone, the company plans to invest R$6 billion to increase annual production to between 250,000 and 300,000 vehicles, domesticate parts, and develop new products.

Shi acknowledges the need for a larger factory, as the recently opened unit alone cannot meet GWM's future plans. The expansion plan is currently undergoing feasibility studies and is being persuaded by Chinese executives, according to the automotive industry portal Autodata . Santa Catarina, Paraná, São Paulo, and Espírito Santo are interested in the project, according to O Globo.

BYD: Aggressive Entry into Brazil and Dominance Among Electric Vehicles

BYD chose a different path, focusing on a strong presence in the hybrid and electric vehicle segment. In three years, it sold 150,000 units. This year, four out of every five electric vehicles sold in Brazil and three out of every ten hybrids are from the brand.

Alexandre Baldy, Senior Vice President and Head of Sales and Marketing at BYD Auto Brasil, attributes this performance to pent-up demand in Brazil. The automaker has been importing large volumes of cars using its own ships. The largest unloading occurred in May, with over 7,000 vehicles, at the port of Itajaí, Santa Catarina.

Last year, construction began on the Camaçari complex, with a projected investment of R$5.5 billion. This complex represents BYD's largest project outside Asia, with a capacity of 600,000 vehicles per year. The first production lines, for the Dolphin Mini and Song Pro, are already complete, and the first cars have already been produced .

The SKD controversy and the fear of turning Brazil into a "maquila"

The automaker has clashed with other domestic manufacturers and the National Association of Automotive Vehicle Manufacturers (Anfavea) by requesting a temporary reduction in import tax on SKD kits—from 18% to 5% for electric vehicles and from 20% to 10% for hybrids. The kits are being used to manufacture the Dolphin Mini and Song Pro. The bodies arrive from China welded and painted, and are only assembled locally.

The approach drew criticism over the low level of localization. The company justified the request as necessary to offer "technological, sustainable, and more affordable vehicles" while its factory gains traction.

The reaction from the automaker association, to which BYD is not a member, was immediate and forceful. Along with Volkswagen, Toyota, Stellantis, and General Motors, the association warned that the measure could jeopardize R$60 billion in investments planned through 2030 and lead to the loss of 50,000 jobs.

These companies suggest that Brazil runs the risk of becoming a "maquila" – a low-complexity assembly platform where local work would be limited to "tightening screws," sacrificing skilled jobs and technological development.

Igor Calvet, president of Anfavea, classified the proposal as a "direct threat to the sector's balance," fearing a "competitive imbalance" and a "disguised invasion" of Chinese cars.

Governors from six states (RJ, RS, SC, PR, MG, SP) also joined forces against the tax cuts, arguing that it would disrupt the national automotive supply chain. "We cannot allow the search for cheaper cars today to mean the unemployment of thousands of workers tomorrow," argued São Paulo Governor Tarcísio de Freitas.

Under pressure from both sides, the Brazilian government opted for an intermediate solution : it brought forward the application of the 35% rate for assembly kits from 2028 to 2027, but granted BYD a quota of US$463 million with zero tariffs for six months.

"It was a balanced decision that considered both the need to attract investment and the protection of national industry," said Vice President Geraldo Alckmin, who also serves as Minister of Industry and Commerce.

BYD wants more than half of its car parts to be manufactured in Brazil by 2027.

The Chinese automaker announced last Tuesday (19) that it aims to achieve more than 50% nationalization of parts and pieces by 2027. In partnership with the Brazilian Auto Parts Industry Association (Abipeças) and the National Union of the Automotive Components Industry (Sindipeças), it intends to select Brazilian suppliers and develop a local supply chain for the factory.

"BYD has always planned to manufacture all of its cars in Brazil, and it's natural to look for parts suppliers both in Bahia and in other states," says Baldy.

The automaker presented its direct and indirect demands to the entities. These include essential components such as bumpers, tires, and batteries. A set of tax incentives that the Bahia state government may grant to future suppliers was also presented.