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South America is resistant to electric vehicles as a local fuels remain in the advantage

SAO BERNARDO DO CAMPO, Brazil (Reuters) – Meeting in Brazil this week, auto executives from Toyota to GM spoke to traditional fuels, such as ethanol, natural gas and diesel, underline how South America, protected car market is likely to resist a broader general move in the direction of electric vehicles for the coming years.

FILE PHOTO: A man holds an electric car charger to a parking lot at a McDonald’s restaurant in Sao Paulo, Brazil, 3 March 2018. REUTERS/Nacho Doce/File Photo

Even if car manufacturers refresh their international businesses to concentrate on electric cars in Europe, North America and Asia, executives who oversee the production in Brazil and Argentina are still prioritizing of internal combustion engines, partly by the subsidies for the locally abundant fuels.

“The future of Argentina’s energy natural gas,” said Cristiano Rattazzi, who is the head of the country of the unit of Fiat Chrysler automobiles, as well as the automakers trade group. He added that diesel out of favor in much of the world, still a potential in Argentina.

Argentina natural gas production is expected to increase dramatically as foreign oil companies and the state-owned YPF pour investment in Vaca Muerta, one of the world’s largest shale gas reserves.

Aurelio Santana, director of Brazil’s auto trade group, had similar things to say about ethanol, which powers many of Brazil’s cars.

“It is very important that the government supports investments in research and development, with ethanol,” Santana said. “We should maintain what we already have.”

The desire to hold on to what they know underscores the political rule of local energy producers. Recently, Brazil’s legislature issued a series of tax incentives, called Rota 2030, offer significant advantages for vehicle manufacturers that choose to invest in ethanol research.

The event took place in Sao Bernardo do Campo, the historic home of the brazilian auto industry, which is still reeling from the shock earlier this year that Ford Motor Co would be the closing of the factory in the city.

DIPPING TOES IN

Toyota Motor Corp is so far the only carmaker to announce that it is planning to do, even a hybrid model in South America, with an engine that can run on either electricity or pure ethanol and gasoline.

“It is the best solution for our region,” said Celso Simomura, Vice President at Toyota Brazil operation.

General Motors Co earlier this month the company announced an investment of 10 billion reais ($2.58 billion) in Brazil over the next five years, but none of that will go to electric cars, said Carlos Zarlenga, GM’s chief for South America.

GM will start importing electric vehicles this year to test the market, he added, but there are still no plans to build them in their own country.

Volkswagen AG’s top executive for Latin America and the Caribbean, Pablo Di Si, said the German automaker was planning to import six new electric or hybrid models in Brazil to 2023. But he also said that there were no plans to produce them locally.

“In Latin America, we must take into account all reserved,” Di Si said, pointing to the lack of a legal framework for electric vehicles, and not enough charging infrastructure. Volkswagen wants to sell 1 million electric vehicles worldwide by 2025.

Fiat’s Rattazzi was convinced that the old ways would survive in South America in the medium term.

“In 2030,” he predicted, “the internal combustion engine still have a place.”

($1 = 3.8768 reais)

Reporting by Marcelo Rochabrun; editing by Christian Plumb and Rosalba O’brien

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