Brazil to offer tax credits to carmakers who lower automobile prices

Brazil is all set to partially introduce a federal diesel tax this year to fund President Luiz Inacio Lula da Silva's plan to bring down automobile costs for the people at large. Tax credits would be offered as incentives to automobile manufacturers who opt to bring down prices of their respective models.

The tax credit for vehicle manufacturers who bring down prices of models on offer would largely be funded by the federal diesel tax that is expected to generate 1.5 billion reais. Of this, around 1 billion reais will go towards powering discounts for buses and trucks while the remainder will be for cars.

The diesel tax had been cut by previous Brazil President Jair Bolsonaro in 2022, till end of 2023, but has now been brought back by current President Luiz Inacio Lula da Silva through a temporary executive order. Under it, carmakers are likely to offer discounts anywhere between 2,000 reais to 8,000 reais. This would depend on factors such as energy efficiency, price and domestic content. It could also accelerate demand for new vehicles in the Brazilian market, one that is seen as crucial among all emerging economies in the world.

(With inputs from Reuters)