The European Union and Mercosur countries Brazil, Argentina, Uruguay, and Paraguay are set to formalize a free trade agreement that will create the world’s largest duty free trade zone, covering more than 700 million consumers. Once ratified, the agreement will significantly reduce or eliminate tariffs on the majority of industrial goods traded between the two regions.
For the bus industry, the agreement is expected to lower cost barriers and expand sourcing and manufacturing opportunities across the EU and Latin America. Today, many vehicle components including axles, powertrain systems, electronics, structural parts, and interior components face tariffs of up to 35 percent when exported to Mercosur markets. These duties have historically limited cross regional supplier integration and raised vehicle build costs.
The phased removal of tariffs on up to 91 percent of EU exports and 92 percent of Mercosur exports is expected to make European bus components more price competitive in Latin America, while also improving access to raw materials and semi finished products sourced from Mercosur countries. This is particularly relevant for electric and low emission bus platforms, where cost sensitive components such as power electronics, structural materials, and battery related systems play a critical role in total vehicle cost.
Beyond cost reduction, the agreement supports closer industrial collaboration. Easier market access is expected to encourage European suppliers to localize production, engineering support, and aftersales services in Mercosur countries. At the same time, Latin American bodybuilders and OEMs gain improved access to European certified components, engineering expertise, and validation processes.
As bus markets in Latin America continue to electrify and modernize public transport fleets, the EU Mercosur agreement provides a framework for deeper integration of supply chains, shared standards, and long term industrial partnerships across both regions.
