Exports to Argentina help Brazil sustain car manufacturing pace

Driven by stronger demand from its southern neighbor, the share of exports in Brazil’s auto industry has risen from 14% to 25% over the past year.

Noticing signs of a rebound in Argentina—Brazil’s top export destination for vehicles—automakers had been preparing since January to ramp up shipments. At the time, the National Association of Vehicle Manufacturers (ANFAVEA) projected a 7.8% increase in exports in 2025.

However, the recent performance exceeded expectations, said the ANFAVEA president, Igor Calvet. On Thursday (7), the industry association revised its forecast sharply upward, now projecting a 38.4% increase in vehicle exports this year.

In a year, vehicle sales from Brazil to Argentina surged 156.5% to 183,900 units. Argentina’s share of total exports rose from 35% to nearly 59%. Although sales to other neighboring markets such as Colombia and Chile also increased, Argentine demand was the key driver behind what ANFAVEA is calling a “surprising surge.”

From January through July, Brazil exported 312,100 vehicles, a 52.7% increase compared to 2024. Export revenue reached $8.33 billion, up 43.9% year-over-year.

According to Mr. Calvet, foreign demand has been the main reason automakers have expanded hiring in recent weeks. In just one month, 400 new positions were created. Total employment in the sector now stands at 109,100, up 4.4% over the past 12 months.

Stronger prospects for exports are helping the industry offset weaker domestic demand and maintain the production targets announced at the start of the year.

ANFAVEA lowered its forecast for domestic market growth in 2025 from 6.3% to 5%, or 2.765 million vehicles. However, it kept its projected increase in production at 8.4%, totaling 2.749 million units.

Not even the federal government’s Sustainable Car incentive program will be enough to reverse the trend. The program eliminated the Industrialized Products Tax (IPI) on a list of basic car models, leading to a 16.7% spike in sales of those vehicles in its first month.

The industry association points to high interest rates as one of the main factors behind weakening demand, especially for trucks. ANFAVEA holds a pessimistic outlook for the heavy-duty transport segment.

Since the beginning of the year, demand for trucks has fallen 4.1%, and the situation may deteriorate further in the coming months. The trade group revised its 2025 forecast for domestic truck sales from a 0.2% increase to an 8.3% drop. “Instability hurts us, and high interest rates kill us,” Mr. Calvet said.

But it’s not just the basic interest rate—which is now at its highest level since 2006—that threatens to slow production lines. According to Mr. Calvet, the U.S. government’s new import tariffs, in effect since Wednesday (6), will also impact the truck market. He noted that nearly all of Brazil’s exports to the U.S. rely on trucking to reach the ports.

The tariff hike announced by President Donald Trump is also expected to hurt exports of components such as engines. In that case, the import tax jumped from 2.5% to 27.5%. Based on ANFAVEA’s estimates, this could cost the industry $268 million if current shipment volumes continue, which the leader doubts will happen.

While presenting the industry’s results, Mr. Calvet again criticized the growing volume of Chinese vehicle imports. Chinese car sales in Brazil are now approaching those from Argentina.

From January to July, 87,800 Chinese vehicles were sold in Brazil—up 41.2% from the same period in 2024. Vehicles imported from Argentina totaled 121,400, an 11% increase year-over-year.

“Imports from Argentina are positive because we also export there, but we sell nothing to China,” he pointed out.