BYD chooses Brazil for its first EV hub outside Asia

BYD will invest 3-billion reais (R11.6bn)  in Brazil to build its first electric-car plant outside Asia as the Chinese giant seeks to extend its geographical reach amid a global surge in sales. 

The fully-electric and plug-in hybrid maker — which rivals Tesla as the world’s largest producer of EVs — plans to build a production complex in the northeastern state of Bahia, according to a statement on Tuesday. The facility will include hybrid and electric car production, a unit focused on chassis for electric buses and trucks, and one to process lithium and iron phosphate for the international market. Operations are expected to start by 2024. 

The site will be BYD’s first outside Asia, where the company also plans to invest in Thailand and Vietnam. 

The decision follows efforts by Brazil’s government to deepen ties between Latin America’s largest economy and China, and to woo top companies to invest in the country. This efforts will accelerate investments, particularly in sustainable projects, and help boost growth, Stella Li, BYD global vice-president, said. 

“This is a country we trust and this is a government we trust,” Li said in an interview in Sao Paulo. “I see a China-Brazil win-win position to build up a top level, very friendly relationship. And this is making a huge difference.”

President Luiz Inacio Lula da Silva visited Xi Jinping in April and signed 15 agreements worth about 50-billion reais (R192.9bn) in Chinese investment pledges. Brazil’s leftist president has been courting Chinese companies to build new plants in the country to create jobs and deliver on his prosperity pledge. 

The BYD factory will have an initial annual capacity of 150,000 units, with the potential to reach 300,000 units. It will be the second facility dedicated exclusively to electric and hybrid cars in Brazil. Two years ago, Great Wall Motors agreed to buy a Daimler factory in Sao Paulo, pledging investments of 10-billion reais (R38.6bn) by 2032. 

BYD expects the investment will attract local suppliers that can specialise in the production of electric and hybrid vehicles. The site will generate more than 5,000 jobs. 

“This will become the hub for innovation,” she said, adding that suppliers will be coached. “Because we own the technology, we have capability to help them.”

The Chinese firm has been in Brazil since 2015, when it opened an electric bus chassis factory in Sao Paulo. Later, it started producing photovoltaic modules in the same region and lithium iron phosphate batteries in Amazonas state. 

Brazil’s market has the potential to develop in the same way as China’s, with hybrid vehicles gradually giving way to pure electric technologies as charging infrastructure improves, according to Li. 

But the technology will have to compete with cars fuelled by ethanol made out of sugar cane, another cleaner solution that dominates Brazilian streets. Sales of hybrid or electric vehicles in Brazil accounted for only 2.5% of the total last year, according to the sector’s lobby group Anfavea. The technology is expected to reach 7% of light vehicle sales by 2030, much lower than the world’s estimated average of 37%, according to Bright Consulting. 

But unlike the US — a market BYD is avoiding because the government is not clear on its plans “towards Chinese corporations” — Brazil is well positioned in the company’s expansion strategy, she said.

“Brazil wants more Chinese companies to invest here, to help the local economy,” said Li. “Visibility for the future is an important factor for us.” 

More stories like this are available on bloomberg.com