Brazil races down China’s brick road of renewables

The three-pointed star of Mercedes-Benz still watches over the highway in Iracemápolis, but the old German car factory beneath it has been under new ownership since 2021.

Chinese carmaker Great Wall Motors is scheduled to begin production at the site this month. Most of GWM’s sales are still of petrol cars, but the new Iracemápolis plant will focus on hybrids, turning out the Haval H6.

In Brazil’s industrial heartland of São Paulo state, the GWM factory is just one of several Chinese investments in the country’s clean energy sectors, bringing manufacturing onshore. 

Further north, in the state of Bahia, the world’s largest electric vehicle maker, BYD, has already started production of Brazil’s first domestically built battery-electric passenger car. The plant was previously owned by Ford.

BYD has two other factories in Brazil. A foothold in the south-eastern city of Campinas was established in 2015, which makes electric bus chassis and solar panel modules. A plant in the Amazonas state of Manaus assembles battery packs for BYD buses.

Both the GWM and BYD plants will initially assemble cars from kits imported from China, but the plan is to increase the number of components manufactured in Brazil. 

Industrial policies

“We need to be a local company. [We need] to produce in Brazil and to export to the wider region,” Ricardo Bastos, the GWM Brasil director of institutional affairs, told Dialogue Earth in an interview.

Investments by GWM, BYD and Chinese wind turbine maker Goldwind, which purchased a former General Electric factory in 2024, align closely with President Luiz Inácio Lula da Silva’s “sustainable” reindustrialisation agenda.

“Manufacturing output is a permanent conversation in Brazil, but this government is particularly keen on pursuing industrial policies,” Armando Castelar, the coordinator of applied economics at the Brazilian Institute of Economics, told Dialogue Earth.

On his state visit to Beijing in May, Lula secured several commitments by Chinese firms to invest in clean energy manufacturing, including from turbine maker Windey to build an assembly plant in Bahia. 

Lula also came back with a US$1 billion commitment from Envision Energy to build a sustainable aviation fuel complex, and a plan from automaker GAC to break ground on a new EV plant in Brazil by 2026.

Energy cooperation between China and Brazil is not new. In the 1990s, Beijing looked to Brazil for engineering know-how, with turbines for the Three Gorges Dam manufactured in São Paulo. By the 2010s, the dynamic had flipped.

China’s State Grid – the world’s largest utility group – has played a central role in developing Brazil’s electricity grid. It entered the market in 2010 and, after a series of high-value acquisitions, began competing in energy auctions. 

Deploying “ultra-high voltage” transmission technology it developed to bridge vast distances in China, the firm built two lines that span the length of Brazil. It still continues to construct some of the country’s most ambitious transmission projects.

Oil has become another pillar of cooperation since the 2010s. In 2009, state oil firm Petrobras tapped a $10 billion oil-for-credit line from China Development Bank. Now, China has become one of Petrobras’s largest creditors and export markets.

Chinese investment in Brazilian renewables started with hydropower, which still dominates the Latin American nation’s energy mix. Since 2015, China Three Gorges has deployed more than $5 billion in hydro acquisitions and upgrades. 

State Power Investment Corporation followed suit, paying $2.4 billion for the São Simão dam in Goiás state. Both firms have pivoted to Brazil’s wind-rich Northeast region.

Energy complex

Lula also returned from Beijing touting a pledge from China General Nuclear to invest more than $500 million in a renewable energy complex in Piauí, also in the Northeast, adding to an ever-growing pipeline of Chinese-led wind and solar projects.

These investments are part of what Claudia Trevisan, the executive director of the Brazil-China Business Council, described to Dialogue Earth as a “notable increase in Chinese-led projects linked to sustainability.”

With a grid that is already made up of 90% low-carbon sources, many analysts are excited about the country’s green future.

“Brazil has the potential to emerge as a green energy hub, not just for Latin America, but for the world – and I think China sees this potential,” Paulo Feldmann, an economics professor at the University of São Paulo, told Dialogue Earth.

Still, the twin goals of industrialisation and green transformation do not always align, with surging imports presenting challenges to local manufacturing sectors. 

Last year, the Global South overtook the Global North as the main export market for Chinese solar panels. 

Meanwhile, emerging EV markets like Brazil remain small in absolute terms, but they are growing fast and overwhelmingly dominated by Chinese exports. Both these trends have been positive from a climate perspective. 

In Pakistan, ultra-cheap Chinese panels have triggered a grassroots solar boom, and according to Rodrigo Sauaia, the CEO of Brazilian industry group Absolar, a similar phenomenon is underway in Brazil. 

“We could talk about a solar transformation in the past 10 years,” Sauaia told Dialogue Earth. Yet Edgar Barassa, an e-mobility expert with Barassa & Cruz consulting, highlighted risks for local industrial capacities. 

“The challenge is that Chinese firms – facing domestic overcapacity in EVs and batteries – are [exporting] surplus production or [assembling] vehicles abroad with minimal integration,” he told Dialogue Earth. 

He warned that “if left unchecked, this dynamic risks entrenching a peripheral role for Brazil in the clean tech value chain.”

Tariffs hike

In an attempt to confront this challenge, Brasília has combined an arsenal of sticks and carrots to bring production onshore. Among these, the Brazilian development bank has unlocked $54 billion in subsidised credit under the New Industry Brazil strategy.

The government has also reinstated import duties on electric vehicles, rising to 35% by July 2026. It has reimposed tariffs on solar panels, raising them to 25% in 2024. A hike in tariffs on completed wind turbines to 25% comes into force by January 2026.

To some extent, Beijing and its corporate champions also face a dilemma – whether to keep relying on exports of ultra-competitive Chinese products or to invest in local manufacturing, turning Brazil into a launchpad for Latin American exports.

“Brazil can be a base for Chinese production to export to South America, But for this, we must comply with local content rules. I am cautiously optimistic,” GWM’s Bastos said.

Celio Hiratuka, at the State University of Campinas, echoed those views. “It’s too early to tell if the government has been successful. GWM appears serious about selecting suppliers and is betting on local content,” he told Dialogue Earth. 

“But I think that BYD is still testing the market – their strategy might be to postpone the moment they need to [begin to] produce here in Brazil,” Hiratuka said.       

BYD has faced criticism for flooding the market with imports, including via its car-carrier ship, the BYD Shenzhen, which is the largest vessel of its type in the world.

Bastos also admitted that there is a limit to the extent that GWM can localise manufacturing of key components like batteries. “Producing the cells would be very, very expensive,” he said.

“As to how much we can expect to onshore – that’s a difficult question,” André Cieplinski, of the International Council on Clean Transportation in Brazil, said.

“But even if we can’t onshore the whole battery manufacturing process, if we are able to nationalise other components, it can be positive for jobs,” he told Dialogue Earth.

Although Cieplinski said that the Brazilian development bank has been vital for the development of solar in Brazil, Absolar’s Sauaia suggested that the government has not gone far enough in its industrial policy.

Right direction

“Brazil is the only possible hub for local manufacturing of solar photovoltaics in South America, but for that to develop, there are still some policies we need to work on,” Sauaia said, referring to the government’s tariffs on solar panels, before adding:

Rather than choke the market, it would be better to establish constructive policies – to use the government’s buying power to create demand and to establish strong industrial policy that incentivises the establishment of manufacturing hubs in Brazil.

The CEO of the Brazilian Wind Energy Association, Elbia Gannoum, is more bullish on the state of the sector and the role of government policy. “[It] has made significant efforts to keep the local supply chain active,” she told Dialogue Earth.

“Between 60% and 80% of wind turbine components [including blades, towers, and nacelles] are already manufactured in Brazil,” Gannoum said.

Yet for Hiratuka, at the State University of Campinas, the main risk lies in the general election due to be held in 2026. “The government is moving in the right direction, but everything could change with a political turn at the next election,” he said. 

Jacob Mardell is an analyst, reporter and editorial coordinator with over eight years of China-focused experience. Mardell’s work has been published on the BBC, Nikkei Asia, Foreign Policy, Politico and The New European, among others.

This edited article was originally published on Dialogue Earth on August 8 under the Creative Commons BY NC ND licence. Read the original here.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy of China Factor.