Beto Richa (R), governor of the Brazilian state of Parana, greets Audi chief executive Rupert Stadler, September 18. Photo: AFP/Getty Images
International carmakers are betting strongly on Brazil, the world’s fourth largest car market. Two of the German luxury manufacturers – Volkwagen’s Audi, and BMW – have announced big investment plans over the past year. Now a third has joined them, Mercedes-Benz. The world’s third-biggest luxury carmaker says it is to invest €170 million ($230 million) in a new manufacturing plant in São Paulo.
Mercedes announcement follows Volkswagen’s confirmation two weeks ago that it would resume production of of its luxury subsidiary Audi in Brazil, seven years after closing a plant that used to produce them. VW, Germany’s biggest automaker, also said it would begin local assembly of its newest Golf model in its factory in São Jose dos Pinhais, outside the state capital of Parana. It estimated its total investment there at $529 million. BMW, the world’s best-selling premium carmaker, said last October that it would build a new plant in the southern state of Santa Catarina and invest $270 million. It aims to produce 30,000 vehicles a year there.
There are several reasons for the German manufacturers’ investment drive. One is President Dilma Rousseff’s initiative to promote domestic investment under the “Inovar Auto” plan. She has raised taxes on imported vehicles while offering tax breaks for carmakers who produce at home. Car buyers and Rousseff will have to be patient, however. The first new locally built BMW’s won’t start to roll off the assembly until at least 2015.
A longer-term attraction for invesment: the premium segment represents only 1% of car sales, yet Brazil’s middle class continues to expand — and with it demand for luxury goods. The incomes of skilled Brazilian professionals is increasing, unlike back in Europe, where the local auto market also remains dull. There is also some momentum in the Brazilian auto industry. The national automakers association, Anfavea, raised its 2013 production outlook to 11.9% this year as exports in August surged to their strongest since at least 2010.
Short-term risks remain for the German carmakers in Latin America’s largest economy: consumer confidence is falling and interest rates rising. But their investment will give Rousseff heart. Brazil’s president recently took to Twitter to call out The Economist newspaper for asking in its latest edition, Has Brazil blown it? (Four years ago, the publication’s cover headline had read, Brazil takes off.)
Eles estão desinformados. O dólar estabilizou, a inflação está sob controle e somos o único grande país com pleno emprego (cont)
— Dilma Rousseff (@dilmabr) September 27, 2024
Somos a 3ª economia que + cresceu no mundo no 2º trimestre. Quem aposta contra o Brasil, sempre perde.
— Dilma Rousseff (@dilmabr) September 27, 2024
“They are misinformed. The dollar is stable, inflation is under control and we are the only great country with full employment, ” she tweeted on September 27, adding, in a follow-up tweet, “those who bet against Brazil always lose.” Mercedes, Volkswagen and BMW, for three, have placed their stakes.
