Brazilian flex fuel lessons to hybrid vehicles: a bridge too far?

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This paper aims to gather lessons of the successful sustainable social transition to flex fuel technology in Brazilian automobile industry and apply them to the case of the hybrid vehicle. A model of three gaps of a sustainable innovation is presented: the scale, price gap and performance gaps. The main actors are the government, the manufacturers and the consumers. The study used secondary data of automobile sales and prices in the Brazilian market, and former case studies on Brazilian flex fuel technology. Results showed that the government subsidy to the new technology was necessary to set the market cycle in movement, and can be withdrawn after the normal market conditions are achieved. The same rationale could be applied to hybrid vehicles, nevertheless the gaps being larger. The subsidy necessary to overcome the gaps is calculated. Furthermore, evidence shows that Brazilian tax policy backfires in the case of the hybrid.