Mercedes-Benz, BMW and Audi may restart production in Brazil, as demand grows

Luxury car-makers Mercedes-Benz, BMW and Audi may restart their production in Brazil in a bet that the country’s market for luxury vehicles may triple by 2017. Mercedes said yesterday that it will make sedans and sport-utility vehicles in Sao Paulo state in a revival of local output. In the past months Audi and BMW made similar statements. pledging to invest more than $220 million to assemble models that are now imported and will face higher duties in coming years.

Total car sales will reach a record 4.3 million this year, according to Anfavea, Brazil’s auto-industry trade group. As mature markets such as the U.S. and Europe expand at a slower pace, automakers are counting on places like Brazil. The luxury-auto makers are returning to Brazil as Anfavea creates several programs with the government to support local production, Luiz Moan Yabiku, the trade group’s president, said in a Sept. 20 interview.

The Mercedes plant, to cost about 170 million euros ($230 million), will be in Iracemapolis, about 170 kilometers (105 miles) northwest of the city of Sao Paulo. Schiemer told reporters in Brazil yesterday that the first phase of production will be 20,000 units a year.

Audi, based in Ingolstadt, Germany, announced plans last month to invest 500 million reais for a factory in Sao Jose dos Pinhais in Parana state in southern Brazil. The company’s sales target is 30,000 vehicles a year by 2018, including imported vehicles.

BMW said in October 2012 that it will spend 200 million euros on a factory in the southern state of Santa Catarina. The plant will produce as many as 30,000 vehicles a year, according to the Munich-based company.

Companies are looking for lower costs, weaker unions and stronger markets, Bernardo Carneiro, an analyst at Deutsche Bank SA in Sao Paulo, said in a Sept. 9 telephone interview. “In emerging markets, you have consumers with more disposable income and unemployment at historic lows,” he said. “It’s about Brazilian domestic consumption.”

Production in Brazil, Latin America’s largest economy, is also tempting automakers because it can carry an exemption for vehicles built aboard from an upcoming tax of about 30 percent, said Tony Volpon, head of emerging-markets research for the Americas at Nomura Holdings Inc.

“There are import regimes that if you build cars in Brazil you can import other cars into Brazil at a much lower tariff,” Volpon said in a telephone interview from New York. “So if BMW builds a couple of cars in Brazil they can bring the other BMWs from Germany and not pay the 30 percent tariff.”

adapted from Bloomberg

Mercedes Benz showroom Sao Paulo