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 (GWM), the facility’s new owner, 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.
The GWM factory, setting up in Brazil’s industrial heartland of São Paulo state, is just one of several recent Chinese investments in the country’s clean energy sectors that bring 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, at a plant that was previously owned by Ford.
BYD has two other factories in Brazil: a foothold in the south-eastern city of Campinas, established in 2015, which makes electric‑bus chassis and solar‑panel modules; and a plant in Manaus, Amazonas state, that assembles lithium‑iron‑phosphate 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 gradually increase the number of components manufactured in Brazil. “From next year, we will localise several items. We need to be a local company, to produce in Brazil – not just to take advantage of government incentives, but to export to the wider region,” said Ricardo Bastos, GWM Brasil’s director of institutional affairs, in an interview with Dialogue Earth.
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, so there is plenty of space for looking favourably at Chinese investment that goes into manufacturing,” Armando Castelar, coordinator of applied economics at the Brazilian Institute of Economics (IBRE), 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 USD 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, China 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, and China became a major source of investment and technology for Brazil’s energy sector.
China’s State Grid – the world’s largest utility company – 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 the “ultra-high voltage” transmission technology it developed to bridge vast distances in China, the firm built two lines that span the length of Brazil – and it continues to construct some of the country’s most ambitious transmission projects.
Oil has become another pillar of energy cooperation since the 2010s. In 2009, state oil company Petrobras tapped a USD 10 billion oil-for-credit line from China Development Bank, beginning a relationship that has seen China become one of Petrobras’s largest creditors and export markets.
Chinese investment in Brazilian renewables started with hydropower, which still dominates Brazil’s energy mix. Since 2015, China Three Gorges has deployed more than USD 5 billion in hydro acquisitions and upgrades. State Power Investment Corporation followed suit, paying USD 2.4 billion for the São Simão dam in Goiás state, but both firms have since pivoted to Brazil’s wind-rich Northeast region.
Lula also returned from Beijing touting a pledge from China General Nuclear to invest more than USD 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 in the region.
A ‘notable’ increase
These investments are part of what Claudia Trevisan, executive director of the Brazil-China Business Council, described to Dialogue Earth as a “notable increase in Chinese-led projects linked to sustainability.”
With vast potential for growth in its already significant solar, wind and biofuels sectors, as well as a huge electricity market and a grid that is already made up of 90% low-carbon sources, many analysts are excited about Brazil’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.
On signing the “Fuel of the Future” law, which locks in demand for low-carbon fuels, Lula vowed in October 2024 that Brazil will “deliver the greatest energy revolution on Earth”. Chinese officials and executives also appear optimistic. The CEO of Goldwind has spoken of Brazil’s
“unrivalled” wind resources, while “green development” was placed at the centre of China-Brazil cooperation last November, when the two countries signed an agreement on aligning China’s Belt and Road Initiative with Lula’s New Industry Brazil and Ecological Transformation plans – even if Brazil has continued to snub membership of China’s flagship overseas investment initiative.
But the twin goals of industrialisation and green transformation do not always align, with surging imports presenting challenges to local manufacturing hopes. 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 ten years,” he told Dialogue Earth.
“As the Global South looks to decarbonise, China’s scale and ability to deliver low-cost clean energy technologies make it an indispensable partner,” said Aya Adachi, an associate fellow at the German Council for Foreign Relations. However, Adachi noted that these countries are not simply looking to import products – “they are adopting local content requirements and tariffs to encourage more value-added production”, she says, noting that “between 2016 and 2024, around two-thirds of global trade defence measures targeting China came from developing countries”.
Edgar Barassa, an expert in e-mobility with Barassa & Cruz consulting, highlighted risks for local industrial capacities. “The challenge is that Chinese firms – facing domestic overcapacity in EVs and batteries – are incentivised to export surplus production or assemble vehicles abroad with minimal integration.” Speaking to Dialogue Earth, he warned that “if left unchecked, this dynamic risks entrenching a peripheral role for Brazil in the clean tech value chain”.
Sticks and carrots
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 (BNDES) has unlocked BRL 300 billion (USD 54 billion) in subsidised credit under the New Industry Brazil strategy, while the auto‑focused Mover programme provides tax credits to firms so long as they relocate production to Brazil and channel a share of their turnover into domestic research and development.
On the defensive front, the government has reinstated import duties on electric vehicles, rising to 35% by July 2026; re‑imposed tariffs on solar panels, raising them to 25% in November 2024; and approved a hike in tariffs on completed wind turbines, from 11.2% to 25% 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, placating Brazilian demands for investment and helping turn Brazil into a launchpad for Latin American exports.
I am cautiously optimistic, but the challenge lies in translating memoranda of understanding into investment projects that generate measurable socio-economic outcomes
Edgar Barassa, expert in e-mobility
Brazil can be a base for Chinese production to export to South America,” says GWM’s Bastos, “but for this, we must comply with a lot of local content rules”.
Concern about “unbalanced trade” with countries in the Global South is increasingly prevalent among Chinese think-tankers. Liu Hongzhong, for instance, who teaches economics at Xi’an Jiaotong University in Shaanxi, urges “more balanced and sustainable economic and trade cooperation with countries in the Global South”.
According to Adachi, “Beijing is aware of the tensions created by growing trade imbalances with the Global South, but unlike its often forceful responses to trade actions by high-income nations, China has largely avoided retaliating against developing countries”.
The clutch of manufacturing deals that Lula secured in May are evidence that Beijing is listening, but the jury is still out on how successful Brazil will be in capturing more of the cleantech value chain from China.
“I am cautiously optimistic,” said Barassa, “but the challenge lies in translating memoranda of understanding into investment projects that generate measurable socio-economic outcomes”.
Celio Hiratuka, an associate professor at the State University of Campinas, echoed this sentiment: “It’s too early to tell if the government has been successful,” he told Dialogue Earth. “GWM appears serious about selecting suppliers and is betting on local content, 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.”
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 admits that there is a limit to the extent that GWM can localise manufacturing of important components like batteries. “Producing the cells would be very, very expensive, but we are talking with suppliers about assembling batteries in Brazil,” 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 (ICCT) in Brazil, told Dialogue Earth. “But even if we can’t onshore the whole battery manufacturing process, if we are able to nationalise other components, the result can be net positive for jobs.”
A worker installs solar panels on the roof of a public school in the city of Salvador, Bahia state. Experts are divided on whether the Brazilian government’s efforts to encourage domestic solar panel manufacturing have been sufficient (Image: Joá Souza / Alamy)
Although Cieplinski said that the Brazilian development bank has been very important for the development of solar in Brazil, Absolar’s Rodrigo Sauaia suggested that the government has not gone far enough in its industrial policy: “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.”
Referring to the government’s tariffs on solar panels, Sauaia added that, “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 Brazil’s wind industry and the role of government policy. “The Brazilian government has made significant efforts to keep the local supply chain active with job creation and to attract wind turbine manufacturing to the country,” she told Dialogue Earth, noting that “between 60% and 80% of wind turbine components (including blades, towers, and nacelles) are already manufactured in Brazil”.
Hiratuka said: “The Brazilian government is going in the right direction with its industrial policy, but they need to stay firm in the face of pressure from Chinese firms.”
For Hiratuka, the main risk lies in the general election due to be held in 2026: “The current government is moving in the right direction, but everything could change with a political turn at the next election.”