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Brazil can produce fully electric cars, GM says

Santiago Chamorro rejects hybrid car idea, says country’s turn will come when cost falls

07/05/2022

Santiago Chamorro — Foto: Ana Paula Paiva/Valor

Santiago Chamorro — Foto: Ana Paula Paiva/Valor

Some automakers are preparing to produce hybrid cars in Brazil. This group understands that the vehicle with two engines (one combustion and one electric) is the best way for Brazil to join the global transition to electrification. And to also save its large industrial park, since fully electric cars, which require plug-in charging, are not yet manufactured in the country due to the high cost of this technology. This is not, however, what the management of General Motors thinks. For Santiago Chamorro, GM’s CEO for South America, Brazil does not need an intermediate phase and can, when the technology is more accessible, have an electric car industry of its own.

Mr. Chamorro says he is convinced, from what global studies show, that the fully electric car is superior to the hybrid one in terms of environmental gain. “The other technologies become transient, temporary,” he said.

Fully electric vehicles still represent a very small portion of vehicle sales in Brazil. And they are all imported. The share of this type of car represented 0.1% of sales in 2021 and 0.3% until May this year. Although still small, the share of hybrids in sales was larger – 1.6% and 2%, respectively.

“Volumes are still low; but everything starts this way,” Mr. Chamorro said. The executive points to the premium category, with more expensive models and where sales of fully electric cars are concentrated today, as the gateway to transformation. Consumers in this range, the “early adopters,” as they are called in the United States, are willing to pay for technology that allows driving to be “more fun” and quieter, among other things, the executive said.

“But in the future, cars will be electric in all segments where we have a presence,” he said. When will this be? He replies, with good humor, that this is a topic “for a future conversation.” GM also does not breaks down its electrification schedule per region to achieve the global goal of being carbon neutral by 2040. In Brazil alone, the company has three vehicle plants and one engine plant.

“We produce where we sell,” Mr. Chamorro said, highlighting the vocation of Brazil, ninth largest producer of vehicles in the world and seventh largest market, besides other countries with car assembling in the region, such as Colombia and Ecuador.

With the electric car, the processes will change. “There will be a manufacturing transformation; our employees will have other skills and use other tools,” he said. “The transition will not be immediate, and by then we will have combustion cars with less polluting engines.”

To those who ask him if the electric car technology is not too expensive to be produced in the region, Mr. Chamorro replies with some facts. Besides Brazil being a source of renewable energies in expansion, such as solar and wind power, he recalled that South America offers mineral reserves, such as cobalt and nickel, which favor the development of the vehicles of the future.

Furthermore, he says, the cost of the technology tends to fall. GM has developed a modular platform, with battery packs that can be assembled in various formats for use in different types of vehicles. The flexibility of this platform, called Ultium, allows to meet the needs of those who seek a more affordable car and also of those who want a more luxurious one, with battery packs for longer or shorter range.

Recently, GM and Honda signed a global agreement that will use new generations of this platform to develop economical cars. The companies expect that, in the next generations of electric cars, the cost will be the same of a combustion car.

Mr. Chamorro points out that in the urban environment, the owner of a car used for day-to-day routine travels on average 45 kilometers a day. One charge a week, in this case, would be enough. And for those who think that no farmer is interested in an electric pickup truck, Mr. Chamorro says that today farmers invest in solar and wind power sources. “Many report difficulties in getting to a gas station,” he said.

For Mr. Chamorro, there is no reason to be afraid of the electric car. “If we asked anyone a century ago if they would like to exchange their horse for an automobile, surely many would say they would rather have a second horse. Big changes involve strong emotions.”

Mr. Chamorro points to the expansion of private investment in public charging stations. For him, this market will continue to attract investors as the demand for electric cars grows.

GM plans to invest $35 billion to launch 30 new electric vehicles by 2025. Three of them will come to the Brazilian market. The three models – Bolt EUV, Blazer EV, and Equinoix EV – were presented a few weeks ago on Youtube by Mr. Chamorro. The audience, he says, has already hit 6 million people. “The consumer is curious,” he said.

Mr. Chamorro does not directly criticize competitors that show interest in hybrid cars and defend the use of ethanol in these engines. But he indicates that the subject generates dissent in the sector. “While other companies see this as a small matter, we see it as a central issue,” he says in relation to fully electric cars.

GM’s direct competitors, such as Volkswagen and Stellantis, intend to go this way. Toyota already produces this type of vehicle, and two Chinese brands – CAOA Chery and Great Wall – have already announced they will produce ethanol hybrids in Brazil.

The electric car is, however, only a part of the vehicle transformation process. Mr. Chamorro talks about GM’s autonomous car tests in San Francisco and says that taking the driver out of the wheel will be one of the ways to put an end to traffic accidents.

Connectivity is another part of the transformation. Mr. Chamorro envisions the expansion of the car’s communication with people’s lives. GM is already collecting picturesque moments with its Onstar, a subscription-based communication service for navigation and emergencies. This service has helped, for example, in the rescue of stolen vehicles.

But one of the cases that moved Mr. Chamorro happened in the U.S. The emergency service was called by the mother of a woman about to give birth inside the vehicle. Trained for this too, the operators assisted in bringing the baby into the world. “There is a wave of possibilities coming,” says Mr. Chamorro.

*By Marli Olmos — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Higer sets up strategy to bring electric bus to Brazil

Chinese company wants to turn country into gateway for neighbors in South, Central America

07/04/2022

Marcelo Barella — Foto: Divulgação

Marcelo Barella — Foto: Divulgação

Brazilians going to Qatar to watch the FIFA World Cup in November have a good chance of going to and from the stadiums in one of the 1,800 electric buses that China’s Higer sent to the host country to transport the fans of the 32 national teams. Those who will stay in Brazil, on the other hand, may also have the opportunity to know the vehicle — if government programs to electrify bus fleets move forward. This is expected to materialize quickly in some cities, especially in São Paulo.

The Chinese manufacturer has set up a business plan to hit the streets in Brazil and make the country the gateway to its neighbors in South and Central America, such as Peru and Colombia. The company intends to compete for space with big brands that dominate the Brazilian market, some of which have been operating in the country for more than 60 years.

Founded in 1998, Higer has four plants in China and grossed $5.5 billion last year. It is a young company when compared to competitors, especially the European ones. “We already have 50,000 electric buses in the streets – mostly in China, but also in Europe,” said Marcelo Barella, Higer’s head for Latin America. In Brazil, the Chinese company will operate with TEVx Motors, which will import and distribute the vehicles.

The company has put together a business plan where the operators of the transportation system, whether private or public, will not need to buy the vehicles nor worry about the charging infrastructure. Everything will be leased. The electric bus is 2.5 times more expensive than a diesel-powered one. “A combustion bus costs around R$900,000. The electric one reaches R$2.6 million,” Mr. Barella said.

Higer signed an agreement with Enel in order to compete for the supply of electric buses in São Paulo, which is Brazil’s largest market – and the perfect place to debut in the country, in the Chinese company’s view. The Italian power company holds the power distribution concession in São Paulo’s capital city and 22 other cities in the metropolitan region around it. Enel will compete in biddings for the supply of the vehicles. If it wins, Enel will buy the vehicles from Higer, assemble the charging infrastructure, and lease the whole package to the operators. Higer will run bus maintenance and driver training, which includes having its own personnel inside the operators’ garages.

“The rental system allows the fleet to be changed as quickly as possible. If operators had to buy an electric bus, I’m not sure if they would get the credit for that,” Mr. Barella said. He recalled that São Paulo has 14,000 buses and plans to reach 12,000 electric buses by 2028. Of this total, 2,600 would be running by 2024 and 600 between 2022 and 2023.

The company plans to gain space in São Paulo, as it is one of the most complex urban transportation systems in the world. If it is able to meet the standards of SPTrans, which manages the city’s system, the company will be able to serve any other city in the country, in the executive’s view. Higer invested $10 million to adapt the buses to Brazilian standards. “We have all the tooling ready. If I have an order for a thousand buses, I am able to meet the demand.”

If Higer’s plans go as expected, the company estimates to have 300 employees in 2023 and 500 by 2024. There would be eight to 10 employees in each garage.

At first, the battery-powered vehicles will be imported in one piece, but the company is negotiating with the government of Ceará an area in the port of Suape to install an assembly line, with an estimated investment of $20 million. With the local unit, the idea is to import the buses in a PKD (Partial Knock-Down) system. “The structure of the car comes ready and here we put the windows, seats and engine,” the executive said.

In a second moment, the SKD (Semi Knock-Down) system would be adopted, with higher added value. Mr. Barella explains that a good part of the vehicle maker’s suppliers in China are already in Brazil and could meet Higer’s needs in Ceará. They are global suppliers, such as Siemens and Dana, for engines; ZF for suspension; Bosch for steering gears; or Wabco for brakes. The batteries are from CATL, which has signed an agreement with the Brazilian battery manufacturer Moura for post-sale services. The unit in Ceará will also be the export base for the region.

The choice of Ceará reveals the next step in the automaker’s strategy for Brazil: hydrogen buses. The state has a large supply of clean energy and several projects for green hydrogen production in the medium term. Higer already has 400 hydrogen buses running in China. But it is a longer-term project in Brazil.

Well before the use of hydrogen, the Asian group plans to enter the segment of passenger and cargo electric vans and trucks in Brazil. The vans are expected to arrive later this year and will require a dealer network. On the other hand, Mr. Barella acknowledged that competition for trucks is likely to be fierce. The executive, who has worked for Higer since 2004 in several countries, knows that the heavy truck segment has its leaders, but as seen in the 2018 World Cup, when underdog Korea disqualified world champion Germany, favoritism is only confirmed at the end of the game.

*By Carlos Prieto — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Shortage of diesel threatens Brazil, former ANP director says

Aurélio Amaral says country should create stocks, or harvest will be harmed

06/20/2022

Aurelio Amaral — Foto: Leo Pinheiro/Valor

Aurelio Amaral — Foto: Leo Pinheiro/Valor

Even with the announcements of fuel price increases imposed by Petrobras last Friday, there is a great risk of shortage of diesel in the second half. The warning comes from the former director of the National Petroleum Agency (ANP) and consulting partner at Schmidt Valois Advogados, Aurélio Amaral.

To Valor, the expert, who was director of ANP for four years, including during the truckers strike in 2018, said that the shortage can lead to occasional shortages of fuel in regions that depend more on imports, such as the Central-West. Even after Petrobras announcement on Friday, making diesel and gasoline more expensive, the gap in relation to international prices still remains, according to importers.

This inhibits imports, which account for about 30% of the diesel demand in the country, Mr. Amaral warns. The technician, who was also superintendent of supply of the agency, defended the formation of stocks by Petrobras to help reduce the risks of shortages. But, instead of stockpiling, Brazil gets lost in discussions about prices, Mr. Amaral says.

However, he considers a generalized lack of supply unlikely. But he stressed that the lack of diesel can damage the harvest, since the Central-West, the largest grain producer, is more dependent on imports.

Read the main excerpts of the interview:

Valor: What is the scenario of fuel supply in Brazil?

Aurélio Amaral: We need to keep some stock, because diesel is short in the world. It is necessary to pay so that Petrobras has the capacity to import and keep stocks. We also need to maintain some kind of parity [with international prices], at least for now in this current model, so that other players are encouraged to import and to supply part of the fuel that is not produced in the country. To mitigate prices to the consumer, it is necessary to have some compensatory policy, which the government so far has not wanted. If nobody gives in on one side or the other, the road ahead is that of a crisis.

Valor: Will Friday’s increase help?

Mr. Amaral: I think that the hike was necessary. The government and Petrobras are currently going through a dilemma: how to balance a mixed capital company, which has a social role, and holds a significant monopoly. According to the current law, and the way the pricing is established, Petrobras board has no choice but to raise the prices. It is a very difficult situation for those who are ahead of the board to find a way to hold prices without having a compensation that ensures they will not be held responsible by regulatory agencies [for possible losses].

Valor: How is the scenario for fuel importers?

Mr. Amaral: Nobody is importing. We are in a complicated situation. We need to bring diesel, because we are approaching the harvest, but the price [of oil] continues to rise, although it has had a small drop. There is a big pressure on the world demand for diesel. We are heading towards something dangerous. It is a complex issue that requires a systemic look and, mainly, harmony between Petrobras and the government, an environment of less tension and conflict. Today, it looks like a war, which is not good for anyone.

Valor: What are the risks?

Mr. Amaral: We are not stockpiling, because almost nobody is importing, so we are heading towards a big risk [of shortages]. It is a risk derived today from the war and the pressure of the embargoes on Russia [oil exporter].

Valor: Is there room for Brazil to start building stocks today?

Mr. Amaral: Only Petrobras is able to build a relevant safety stock today, because it owns the entire infrastructure. But how to do this without passing it on to prices? It is a difficult equation. In this current crisis, I think it is very difficult to have time to think about increasing stocks, while discussing price impacts. It would also be necessary to review the pricing policy and the remuneration policy for Petrobras’s investors. Under the current policy, it would have to pass on the costs of inventories. This is difficult in today’s politicized environment.

Valor: Will there be a shortage of fuel?

Mr. Amaral: I don’t believe in a widespread diesel shortage. But the risk of occasional shortages is great if we don’t move towards creating some stock. Mainly in regions that today depend on imports, like the Central-West, agribusiness regions, where the demand for diesel will be high in the second semester. We are heading towards a very emotional situation. It will be tense.

Valor: How to reduce the impact of high prices?

Mr. Amaral: I don’t see a way out that doesn’t involve compensation. But this has fiscal impacts on the federal budget, and can affect congressional earmarks in an election year, the government does not want it. It is not a simple discussion, it is complex. The resources have to come from somewhere. It requires cold blood and more calm, not this atmosphere of tension. If it stays just on Petrobras’ account, it would also be necessary to change the remuneration to shareholders, the dividends, it would be necessary to look at the management rules for publicly traded companies. If Petrobras simply does not pass on the prices, it will be subject to losses.

Valor: What do you think of the proposals made so far?

Mr. Amaral: The way the [sales tax] ICMS reduction was proposed, there is no compensation. With the increase in oil prices and the passing on of margins [the tax reduction] will have, in my opinion, an insignificant impact in terms of prices.

Valor: Will the sale of Petrobras’ refineries solve the discussion?

Mr. Amaral: I have always been in favor of divestments, I think they are welcome to create a competitive market. But they must be done with regulatory monitoring to mitigate competitive effects and avoid abuse of economic power in regions where refineries are dominant. It should be done in the medium to long term. This requires a smooth transition, in order to stimulate other investments. We stopped this process in the middle. We didn’t manage to divest all the refineries in order to start a competitive market. Petrobras continues to have a large monopoly.

Valor: What measures are needed for more competition?

Mr. Amaral: Refining was always thought of with Petrobras, in the Brazilian system as a whole. To take this system that was created to act in an integrated way and dismember it, it is necessary to create alternatives. If you simply sell the refinery, you will transfer the monopoly from the public to the private agent. It is necessary to have measures to create import competition. Brazil cannot, by law, have price control. But how to make this transition without some accompaniment? It is complex.

*By Gabriela Ruddy — Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/
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Brazil will “dance” with U.S., China, Guedes says in Davos

Guedes met UBS CEO Colm Kelleher — Foto: Reprodução/Twitter/ME

Guedes met UBS CEO Colm Kelleher — Foto: Reprodução/Twitter/ME

Economy Minister Paulo Guedes said that “everyone is going after Brazil” at the World Economic Forum and that, with the turnaround in world geopolitics, the country will “dance” with the U.S. and China at the same time.

In a conversation with journalists, Mr. Guedes said that Brazil suffered pressure from both the United States and Europe in the wake of the war in Ukraine to stand on one side. But that now “nobody is cursing us” and Brazil is seen as a solution to energy and food crises.

As an example, he said that the new interest in Brazil with a series of bilateral meetings on Tuesday in Davos — with the CEOs of UBS, Mittal, Alibaba, Sem Merck, Claure Capital, YouTube, Canada Pension Plan Investment (CPP), as well as lunch with investors promoted by Itaú Unibanco.

“There is demand from 30 of the largest companies in the world, but we can’t supply everyone,” said the minister.

In the World Economic Forum, Brazil is almost absent from the agenda, without any specific debate. The public manifestations of most of the authorities present are about the size of a possible recession in the European Union, in the United Kingdom, and perhaps in the U.S. after next year. In other words, little is said about Brazil, except in restricted circles that know more about the country.

According to the minister, “people do not understand: the world has changed and Brazil’s position has improved.” He says that “Brazil has lost 30 years, it has not connected (with global value chains). China got out of poverty, Thailand, everyone went up, and Brazil was left hopping.”

The minister adds that with the crises caused by the pandemic and the war in Ukraine, other countries got into difficulties, but not Brazil. And so, in his vision, the country can redesign its production chains with new axes, such as renewable energy and semiconductors.

In this scenario, said Mr. Guedes, the pressures came on Brazil. He said that the Europeans asked Brazil if the country was on their side or on Russia’s, if it was with the Brics or with the OECD.

On the one hand, the U.S. Treasury Secretary Janet Yellen made it clear that Washington would redesign investment criteria and that the world will never be the same. In other words, the U.S. needs closer supply chains and reliable partners.

The way Brazil is going to stand, according to the minister, is to be “the guy that is going to give food and energy security to Europe. And the U.S., which Brazil is close to and a friend of, will not need to go to China.”

As for China, “the Chinese and the Americans had a synergy that lasted 30 years, then China grew and they started fighting. We are going to dance with both of them.

Furthermore, Brazil wants to accelerate its integration into the OECD. He said he has established a good relationship with Mathias Cormann, Secretary-General of the OECD, who will visit Brazil in the near future.

Source: Valor International

https://valorinternational.globo.com

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