A study released this week by Brazil’s National Association of Motor Vehicle Manufacturers (ANFAVEA) points out that switching from full in-country production to assembling imported kits could eliminate 69 thousand direct jobs in Brazil and affect 227 thousand indirect jobs throughout the production chain.

According to the study, the expansion of the use of CKD (completely knocked down) and SKD (semi–knocked down) regimes as assembly models could have several effects on Brazil’s auto sector, with repercussions not only on employment but also on car parts manufacturers and exports.

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“The survey also estimates an economic loss of up to BRL 103 billion for auto parts manufacturers and a reduction of approximately BRL 26 billion in tax revenue in a single year. Losses in vehicle exports would amount to BRL 42 billion in one year, damaging the country’s trade balance,” the association reports.

In the CKD model, vehicles are imported in completely disassembled form and then undergo welding, painting, and component integration in Brazil. Under the SKD regime, cars are imported virtually ready-made, in large assemblies. As it stands today, China’s maker BYD operates in Brazil mainly under the SKD model, which is used at its factory in Camaçari, Bahia state, inaugurated last year.

Pressure

In mid-2025, the Brazilian government authorized an additional quota of USD 463 million, with zero import tax, for dismantled electric and hybrid vehicles. Valid until January 31, the measure ultimately benefited BYD and sparked widespread criticism from traditional auto makers in the country – such as Toyota, General Motors, Volkswagen, and Stellantis, all represented by ANFAVEA.

With the deadline approaching, the association decided to pressure the government not to renew the import tax exemption on dismantled electric vehicles.

“SKD and CKD are not harmful processes in themselves. Many auto makers started their operations in Brazil using these models, collecting the appropriate taxes and structuring their local production based on that. Others utilize the model to serve niche markets. The problem is maintaining incentives for simple high-volume assembly without requiring domestic value added. This threatens the survival of the highly complex industry and the creation of skilled jobs in the country,” ANFAVEA President Igor Calvet argues.

In his view, the industry as it is currently established in Brazil, with more traditional models, is prepared to compete with the new regimes, but only if conditions are similar. “ANFAVEA and its associates do not fear competition. Over the last few decades, the sector has welcomed several international brands willing to invest and compete in Brazil. What we are seeking is a fair competitive environment, with equal rules for all,” Calvet says in a statement.

In a manifesto published on its website, the association reaffirms its opposition to renewing the exemption on imports of kits for high-volume manufacturing. “[This exemption] may seem like an advantageous solution in the short term, but it does not build a strong industry. Simplified production models do not develop local chains, do not generate the same level of jobs, and do not leave the same value in the country. In the long term, they weaken what took decades to build. We are in favor of competition without distortions and with regulatory consistency,” the association argues.

Approached by Agência Brasil, BYD has not yet commented on the matter. The Brazilian Ministry of Development, Industry, Trade, and Services, however, said in a statement that “the quota system for CKD and SKD imports ends this January and, to date, there has been no request from the sector to renew the measure.”