From July 1, Russia raised scrap tax by 30% and Brazil restored EV import tariffs to 35%. Under dual tariff barriers, Chinese auto exports to Russia fell nearly two-thirds, while Brazil offers CKD low-rate and zero-tariff quotas for localization.
Russia Scrap Tax Surge Drives Import Costs Higher
From July 1, Russia officially raised the scrap tax on non-locally produced vehicles by 30%, with import scrap tax jumping from a maximum of 293,000 rubles to 381,000 rubles, adding approximately 8,000-15,000 yuan per vehicle. Russia's technical regulation authority simultaneously suspended sales certifications for several Chinese truck brands including Dongfeng, Foton, and FAW.
(Image: Chinese cars awaiting customs clearance at Moscow port, Russia)
In the first half of 2025, Chinese auto exports to Russia fell by nearly two-thirds year-over-year, with the market shrinking rapidly.
Brazil Dual Tax Burden: CKD Emerges as Breakthrough
In Brazil, EV import tariffs were restored from preferential rates to 35% from July 1, combined with the reinstatement of 17% industrial product tax. Under this dual tax burden, total import costs for complete vehicles surged by over 50%.
However, Brazil's policy leaves key openings:
- Completely Knocked Down (CKD) assembly rates remain at 14% until year-end
- $463 million in zero-tariff quotas are available
Chinese Automakers' Brazil Presence
| Automaker | Factory Status | Annual Capacity | Production Start |
|---|---|---|---|
| BYD | Bahia factory operational | 150,000 units | 2026 |
| Great Wall | Sao Paulo factory soon | TBA | 2026 |
| Chery | Brazil factory operating | Operating | ~2016 |
Strategic Responses to Tariff Storm
Facing dual tariff barriers in Russia and Brazil, Chinese automakers are accelerating localization:
- Russia market: Reduce scrap tax impact through local assembly
- Brazil market: Leverage CKD low rates and zero-tariff quotas
- Long-term strategy: Build overseas production bases to circumvent tariffs
Core Assessment: Pure export models are no longer viable in Russia and Brazil markets; localization has become inevitable.
