OPINION: Electromobility between China and Brazil: prospects for cooperation and challenges for the energy transition

Despite cooperation with China bringing innovation, economic challenges and differences in market structures have hindered this partnership, writes Ricardo Lopes Kotz.

Ricardo Lopes Kotz pesquisador do CEFD (Foto: arquivo pessoal)

The global energy transition, increasingly linked to industrial competitiveness and technological advancement, places electric vehicles (EVs) in a strategic position. This article analyses the cooperation between China and Brazil in the electromobility sector, addressing whether Chinese foreign direct investment (FDI) can foster innovation and industrial production in the country or whether, conversely, it might generate new forms of dependence within value chains.

Since the beginning of the 21st century, Brazil has established itself as an attractive destination for Chinese FDI, receiving investments in diverse sectors such as oil, electricity and agriculture.

However, this relationship is unequal: whilst China dominates cutting-edge technologies, Brazil faces difficulties in diversifying its economy, which still depends predominantly on commodity exports.

Although China is one of the world’s largest emitters of pollutants, it also leads the transformation in renewable technologies.

One of the central questions is: to what extent can Chinese investments in Brazil strengthen local productive and innovation capacities? Furthermore, how can Brazil leverage these resources to advance in critical sectors, such as batteries and electric vehicles?

To maximise the benefits of FDI, the construction of coherent industrial policies is essential.

Brazil must transform these investments into a platform that develops its internal capabilities, avoiding the trap of dependence, where a lack of coordination between innovation policies could limit the country to assembly activities and resource extraction.

The impact of cooperation on productivity and innovation depends on the robustness of Brazilian institutions. The capital and technology brought by Chinese FDI will not guarantee sustainable development.

Sem uma estrutura institucional adequada, as empresas podem operar como enclaves direcionados à exportação, contribuindo pouco para a economia local.

Dividing the EV value chain into three segments – upstream, midstream and downstream – provides a clearer view of the opportunities and challenges.

The upstream segment involves the extraction and processing of critical inputs, such as lithium, copper and cobalt, which are essential for batteries. China dominates this phase, accounting for 60% of the global refining of these raw materials.

Brazil, with its rich mineral reserves, does not yet add value effectively, requiring public policies to develop processing, thereby avoiding the mere export of commodities.

In the midstream segment, which includes battery assembly and production, Chinese companies are exploring the verticalisation of production.

This movement could open doors for Brazil, allowing the development of local capabilities and a supplier network in the assembly and integration of battery packs.

Particularly within the midstream segment, there are still largely untapped opportunities to develop companies with local capabilities, enabling them to become suppliers of qualified products to Chinese carmakers.

Chinese investments in electromobility offer a unique opportunity for Brazil. Establishing regulatory frameworks that stimulate technical capacity-building and local value creation is crucial to ensuring a green reindustrialisation.

The Brazil–China relationship in the electric vehicle sector must be monitored through policies that promote genuine integration and development, preventing Brazil from becoming a mere extension of Chinese production.

The participation of Chinese companies in energy storage auctions in Brazil may, in turn, foster inter-sectoral spillovers and technological learning.

The downstream segment, which encompasses vehicle assembly and commercialisation, can generate jobs and opportunities, but spillovers are enhanced when investments incorporate engineering and adaptation to the local market.

Globally, Chinese investment in the downstream segment is significant, but in Latin America, it remains concentrated in upstream activities, with the exception of Brazil.

The growing presence of Chinese companies in Brazil reflects a reconfiguration of value chains, driven by the COVID-19 pandemic.

The combination of Brazilian mineral resources with the Chinese innovation ecosystem can foster positive outcomes, provided that investments are aligned with local institutional frameworks.

BNDES plays a fundamental role in the energy transition and in promoting the electric mobility ecosystem in Brazil, acting as a provider of credit and public policy.

However, the country faces significant challenges, such as limited demand for electric vehicles compared to global markets.

In addition to BNDES, industrial policies such as the Mover initiative and the Nova Indústria Brasil (NIB) aim to reduce emissions in the automotive sector through new technologies.

Although cooperation with China brings innovation, economic challenges and differences in market structures have hindered this partnership.

The installation of charging stations, for example, is still modest, demonstrating the fragility of cooperation in low-carbon innovation.

Industrial policy should prioritise the so-called ‘missing middle link’ of the value chain — tooling, automation, electronics, industrial software, quality systems and green certification.

In these segments, linkage effects are significant, and Brazilian companies still exhibit weaknesses.

Strengthening these areas will require targeted industrial policies, including the development of specialised industrial parks and financial coordination between federal and subnational governments, in partnership with leading companies.

For the China–Brazil collaboration to yield long-lasting benefits, the country must position itself as an active agent, utilising this interaction to strengthen its industrial and technological base, which is essential for its energy transition and decarbonisation.

About the Author

Ricardo Lopes Kotz is a researcher at the Centre for Energy, Finance and Development (CEFD). A PhD candidate in Public Policy and International Studies at the City University of Hong Kong, he holds two master’s degrees: the first in Chinese Politics (LL.M) from Renmin University of China, and the second in International Relations from the Federal University of Santa Catarina. He served as a research fellow at the City University of Hong Kong for four years and has published works on topics encompassing technology, innovation and energy, as well as China’s relations with Latin America.