Português
In yet another attempt to stimulate the automotive sector and make popular cars more accessible to the population, the federal government is preparing to launch a new tax incentive program. Called Sustainable Car, the plan foresees a reduction in the IPI (Tax on Industrialized Products) for cheaper vehicles produced in Brazil, with implementation scheduled for next week.
The proposal follows the regulation of the so-called “IPI Verde”, a measure that is part of the Mover Program (Green Mobility and Innovation) and that will tax vehicles differently according to their levels of pollutant emissions and sustainability. In practice, more polluting models will pay more tax, while those that are more efficient and less harmful to the environment will be rewarded with lower rates.
Price reduction for 1.0 flex models
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According to sources close to the Ministry of Development, Industry, Commerce and Services (MDIC), the Sustainable Car will especially benefit 1.0 flex vehicles with less than 90 horsepower, fueled with ethanol or gasoline. Models with a turbo engine, even if 1.0, should not be included. The rule will also require that the car be manufactured in Brazil, which excludes, for now, 100% electric models – all currently imported.
Brands such as Fiat, Volkswagen, Hyundai and General Motors should be directly benefited, with their entry-level models eligible for the incentive. The reduced IPI rate should be valid until the end of 2026 and will be applicable to both individuals and legal entities, including rental companies and fleet companies.
No price limit, but focused on simple vehicles
Unlike past initiatives, such as the program launched in May 2023, which limited benefits to cars up to R$120,000, the Sustainable Car will not have a value ceiling, although its technical criteria will, in practice, end up restricting the benefit to the simplest and most affordable models.
The tax reduction in 2023, still under the justification of stimulating consumption and renewing the national fleet, led to a drop of up to 11% in car prices. The success was so immediate that the stock of the vehicles covered ran out in less than a month. The program was eventually extended and extended to fleet owners.
History of similar programs
The new plan refers to previous initiatives by the Brazilian government to boost the automotive sector. In 1993, at the beginning of the Itamar Franco government, the tax reduction made it possible to bring back the Beetle, and later the incentive was extended to any vehicle with a 1.0 engine. To this day, these categories maintain a reduced IPI tax rate.
As with previous programs, a dispute is expected among automakers to include as many models as possible in the list of benefited vehicles. In past editions, rules were changed or relaxed in response to pressure from manufacturers, who sought to ensure the competitiveness of their products.
Fiscal responsibility and political debate
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Despite its popular appeal, the program raises questions about its fiscal impact at a time when the government is already facing strong pressure to balance public finances. The Executive Branch is expected to argue that the cost of the new incentive will be offset by increased taxation on more polluting and imported vehicles, through the Green IPI and the Selective Tax — the latter provided for in the tax reform as a way to tax products that are harmful to health and the environment.
The Ministry of Development stated in a note that the regulation of the Green IPI "will not have any negative impact or increase in the tax burden," reinforcing that the objective is a fair adjustment between vehicles that pollute more and those that are more sustainable.
Meanwhile, premium vehicle manufacturers and importers are concerned about the redistributive effects of the measure, since their products could be used as a basis to offset the tax waiver for Sustainable Cars.
Green IPI, Selective Tax and tax transition
The Green IPI and the Selective Tax are part of the gradual transition to the new Brazilian tax system, scheduled to begin testing in 2026. This new model also provides for the creation of the CBS (Contribution on Goods and Services) and the IBS (Tax on Goods and Services), which will replace federal taxes such as PIS/Cofins.
By linking the incentive to environmental criteria and local production, the government seeks to stimulate national industry, innovation and sustainability, even if this means giving up revenue in the short term.
DFATOS • Economy & Mobility | June 2025
