The new EU-Mercosur agreement will not have immediate effects for European carmakers
- The current agreement between the Mercosur countries (Argentina, Brazil, Uruguay, Paraguay) and the European Union was signed in June 2019 and completed in July 2020. In December 2024, Mercosur and the EU reached a political agreement on a modified version of the previous agreement, which must be ratified by EU members.
- This agreement confirms the gradual elimination of customs tariffs on thermal vehicles from Europe over a period of 15 years with a transitional period of 7 years accompanied by a quota of 50,000 vehicles exported per year. The elimination of tariffs on fully electric cars will be gradual over a longer period of 18 years but with an immediate reduction of 10% (from 35% to 25%). For European carmakers, this agreement will therefore not have significant immediate effects but will be done over the long term, as taxes are reduced. This should therefore not disrupt the position of the players currently in place and the market shares of each. Eventually, Chinese carmakers have the capacity to offer disruptive products and to have an aggressive commercial policy, which could take shares from other carmakers. This trend has started to be noticeable since 2023 with an increase in the share of Chinese carmakers to the detriment of European ones.
- The Mercosur vehicle market is around three million units each year: 3 million in 2024, compared to 2.74 million in 2023, 2.53 million in 2022, 2.51 million in 2021, 2.42 million in 2020, 3.25 million in 2019 and 3.39 million in 2018. Of this total, European carmakers accounted for 51% of total sales in Mercosur, compared to 52% in 2023 and 53% in 2022.
- Imports mainly concern premium vehicles that only a minority of Mercosur customers can afford. Indeed, the majority of cars produced in Brazil and Argentina (Uruguay and Paraguay do not produce cars) are more than sufficient to meet the demand of Mercosur customers. Furthermore, the agreement with the EU will not change the situation because the local clientele that can buy luxury cars is not expandable.