Jeep recently launched the Avenger, its new compact SUV aimed at the entry-level utility segment. This vehicle was presented with a promotional price of R$ 115 thousand, aiming to compete with models such as Volkswagen Taos, Renault Kardian, Fiat Pulse, and Citroën Basalt.
An aspect that generated additional interest was the reduction in the power of the T200 1.0 turbo engine. Previously, this unit, introduced in the Fiat Pulse in 2021, delivered 130 hp and 20.4 kgfm of torque. However, in the Avenger, the power was reduced to 115.8 hp.
This reduction of 14 horsepower is justified by taxation. The model needed adjustment to comply with the guidelines of the Green Mobility and Innovation program, known as Mover, from the federal government, which will implement new fiscal parameters for automobiles starting in 2027. The car's tax burden will begin to take into account several elements, including energy efficiency, propulsion technology, power, safety, and recyclability, and no longer solely the engine size.
Any unmet requirement results in an increase in the amount to be paid, decreasing the vehicle's competitiveness. Specifically regarding power, cars with up to 85 kW, which is equivalent to about 115.6 hp, do not incur an increase in the rate based on this criterion. Above this threshold, up to 105 kW, the IPI increases by 0.75 percentage points. Furthermore, because it is a mild-hybrid flex-fuel model, the Avenger also receives an additional discount of 1 percentage point.
The overall objective is to encourage the industry to incorporate new technologies to increase the competitiveness and efficiency of automobiles, raising a debate about how tax rules shape vehicle development.
Technical adjustments and market comparisons
The power reduction represents a relatively simple technical adjustment, requiring only the modification of the electronic control unit calibration, without the need to replace parts. Other models, such as the Chevrolet Sonic, were also launched with this new calibration. Renault, meanwhile, opted to maintain the 125 hp of the TCe 1.0 turbo engine found in the Kardian, making adjustments in other areas, such as weight reduction, to mitigate the tax impact without penalizing power.
Before the implementation of the Mover rules, there was a fiscal policy that offered benefits to popular cars equipped with engines up to 1,000 cm³. This policy was established in 1993, providing for the reduction of IPI for popular vehicles under specific conditions related to nationalization and price.
The Fiat Uno Mille was one of the first cars of the new generation of 1.0 models, and many other compacts with engines of the same displacement emerged. The industry intensified investments in solutions to improve engine performance, such as increasing compression ratio, reducing the number of cylinders, and improving the fuel system, all to compensate for the low torque of early 1.0 engines.
Significant progress occurred with the concept of downsizing, a trend that gained international momentum in the late 2000s, allowing engine size to be reduced without compromising performance.
One solution adopted was the popularization of the turbocharger, which was redesigned to generate more power across a wide range of revolutions. Although the turbo is an old technology, it faced skepticism for decades. This was because turbocharging an engine requires reinforcements to the block, cylinder head, and moving components to support the increased pressure and temperature. Naturally aspirated engines, when turbocharged without proper adaptations, often showed early failures.
Additionally, older turbos were affected by what is called turbo lag, characterized by the absence of turbine pressure at low RPM due to insufficient exhaust gas volume to move the rotor. This forced the driver to be cautious to avoid unexpected torque spikes that could lose control of the vehicle.
With the overcoming of turbo challenges, the national industry recognized the possibility of marketing more sophisticated vehicles while paying less tax. Although Ford and Hyundai explored 1.0 turbo cars in the 2010s, it was Volkswagen that advanced in this field. In 2015, the brand launched the up! TSI, equipped with a 1.0 turbo engine producing 105 hp and 16.8 kgfm of torque, and shortly thereafter applied this engine to the Golf as an entry option.
With the arrival of the Polo in 2017, the 200 TSI engine was already widely accepted, presenting 128 hp and 20.4 kgfm of torque. Volkswagen quickly integrated this engine block into the Virtus and subsequently into the T-Cross.
At that time, executives from competitors criticized Volkswagen for selling luxury cars with popular taxes. Soon, General Motors, Stellantis, and Hyundai followed suit, causing the 1.0 engine to no longer be associated with slowness.
International automotive taxation models
Establishing physical limits for tax purposes is not exclusive to the Brazilian market. In Japan, since the post-war period, there has been the keijidōsha category, known as the kei car. This compact vehicle category was created to foster Japanese mobility and economy during the reconstruction after World War II.
The current configuration of this category was defined in 1998 and stipulates that the kei car cannot exceed 3.4 meters in length or 1.48 meters in width. The maximum allowed height is 2 meters, and the engine's volumetric capacity cannot exceed 660 cm³.
In India, one of the tax regulations also considers the total length of the vehicle. Cars up to 4 meters long, equipped with engines up to 1.2 liters for gasoline, CNG, or LPG, and up to 1.5 liters for diesel, receive specific tax treatment for compact vehicles.
A well-known example is the Citroën C3. This model was developed in collaboration with the Stellantis engineering team in India. With a length of 3.98 meters, the compact meets the tax rule that considers external dimensions.
China has emerged as a global powerhouse in electrification thanks to an extensive incentive policy aimed at boosting the sales of electric and hybrid cars. Since 2009, the central government and local administrations have implemented measures including infrastructure investment, financing, subsidies, and tax exemptions to stimulate the sector. Estimates of the total resource volume vary depending on the methodology applied.
More recently, Chinese policy has begun to reduce certain direct incentives, redirecting focus to tax mechanisms and market actions. Direct national subsidies for purchasing new energy vehicles have been discontinued, while some tax exemptions and reductions remain in a transition and gradual decline phase.
Among the measures assisting in the adoption of electrified vehicles in certain Chinese cities is the differentiated treatment for license plates. In large urban centers, obtaining a plate for combustion-powered vehicles may require auctions or lotteries, whereas new energy vehicles receive more favorable treatment. However, values and rules vary depending on the city.
Thus, tax regulations shape and force the industry to adapt to each market. These measures compel manufacturers to seek innovations. Currently, a 1.0 turbo engine generates more power than a 2.0 naturally aspirated engine from twenty years ago or a sixty-year-old six-cylinder block. Evolution is essential and necessary, even if it requires small adjustments or represents a financial cost.