Sales of flex-fuel cars, which run on any mixture of ethanol and gasoline, amounted to 53.6 percent of the Brazilian market in 2005, up from 17 percent in 2004.
Flex-fuel cars took off in 2003, when the Brazilian government instituted a 14 percent sales tax for cars capable of burning ethanol, instead of the 16 percent levied on gasoline-only vehicles. Ethanol-only cars were briefly popular in the late '80s in Brazil, driven by a combination of high oil prices and heavy government subsidies for domestically-produced ethanol. When oil prices fell, and sugar prices rose, the government could no longer afford to prop up the ethanol fuel market, and the ethanol-only cars virtually disappeared.
Unlike the corn- and soybean-derived ethanol used in the U.S., Brazil's ethanol is derived from sugar cane, and now supplies both domestic and export markets. Also unlike the U.S., Brazil is 91-percent self-sufficient in oil, and the country should reach total self-sufficiency when a huge offshore oil field discovery announced today goes on-line in 2011.