BMW Plans $261 Million Auto Plant to Tap Brazil’s Growing Market

Bayerische Motoren Werke AG (BMW), the world’s largest maker of luxury vehicles, will invest 200 million euros ($261 million) in a Brazil factory to boost sales in the fast-growing market and to counter Volkswagen AG (VOW)’s Audi.

The factory, to be located in the southern state of Santa Catarina, is to go online in 2014 and is due to produce as many as 30,000 vehicles a year, Ian Robertson, BMW’s head of sales and marketing, told reporters yesterday after a meeting with Brazilian President Dilma Rousseff in Brasilia.

“The investment plan has been aligned with new automobile industry incentives and is the result of difficult work with Brazilian authorities during the last six months,” Robertson said. “The goal is to reach 30,000 cars and to keep growing. If there is more demand, then there will be more production.”

With car sales declining in Europe and growth in China slowing, BMW is expanding in emerging markets to help boost deliveries 20 percent to 2 million vehicles by 2016 and fend off advances by Audi. The Volkswagen unit plans to produce 150,000 cars a year at a new plant in San Jose Chiapa, Mexico.

BMW announced its intention to build a plant in Brazil in March 2011. The decision was held up by tax changes on imported vehicles. Demand for high-end vehicles is expected to grow amid rising wages and as South America’s largest economy invests to host the soccer World Cup in 2014 and the Summer Olympic Games in 2016.

Tax Breaks

Rousseff’s administration on Oct. 4 announced tax breaks for carmakers that increase investments in Brazil in a bid to revive its shrinking manufacturing industry.

Finance Minister Guido Mantega has said that auto companies will invest $22 billion over the next three years in Brazil. Automakers will have to meet tougher environmental, safety and fuel efficiency standards in order to get additional tax breaks, he said Oct.4.

In May, the government cut the so-called IPI tax on cars, helping drive vehicle sales from this year’s low of 249,500 in February to a record high 420,100 in August, according to the national car dealership association. In September, car sales fell 31 percent from the previous month.

BMW’s nine-month sales increased 8.6 percent globally to 1.11 million vehicles, maintaining an edge over Audi, which delivered 1.1 million cars and sport-utility vehicles.

To protect its lead, the Munich-based company is also expanding production in its sport-utility plant in Spartanburg, South Carolina, and has the option of quadrupling local production in China to 400,000 vehicles.

To contact the reporters on this story: Raymond Colitt in Brasilia Newsroom at rcolitt@bloomberg.net; Carla Simoes in Brasilia Newsroom at csimoes1@bloomberg.net.

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net.

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