Audi Resumes Brazil Car Output in Expansion Bid to Beat BMW

Audi AG (NSU) will revive vehicle production in Brazil next year as it looks to unseat Bayerische Motoren Werke AG (BMW) as the global leader in luxury-car sales and to strengthen its position in Latin America.

The Ingolstadt, Germany-based unit of Volkswagen AG (VOW) plans to invest 500 million reais ($221.8 million) in Latin America’s biggest economy by 2016, Chief Executive Officer Rupert Stadler said yesterday after meeting with President Dilma Rousseff in Brasilia. Audi expects to sell 30,000 cars in Brazil by 2018 including imported units.

“We expect the Brazilian luxury car market to grow 170% in the next few years,” Stadler told reporters. “In addition to Asia and Europe, with Brazil and Mexico we are now consistently strengthening our position in the American continent.”

Audi, the world’s second-largest maker of luxury vehicles, is following BMW to Brazil a year after the Munich-based manufacturer announced plans to invest 200 million euros ($267 million) on a new plant in the country. BMW plans to produce as many as 30,000 vehicles annually starting next year at the factory as it looks to maintain a lead over Audi and Daimler AG (DAI)’s Mercedes-Benz, which have both vowed to become No. 1.

Audi’s plant in Sao Jose dos Pinhais, Brazil, will produce models A3 sedan, expected to reach markets in September 2015, and the Q3 SUV, expected to be introduced in January 2016.

Mercedes, the world’s third-largest luxury-carmaker, is considering assembling cars in Brazil and will make a decision by the end of the year, Daimler Chief Executive Officer Dieter Zetsche said last week at the Frankfurt auto show.

Global Expansion

Audi’s plans in Brazil are part of an effort to broaden its production network outside Germany to pursue its growth goals and reduce exposure to currency fluctuations. The car maker produced 75 percent of its vehicles at its two German plants in 2009. That share is forecast to fall to 45 percent by 2017, according to data from IHS Automotive. Audi plans next year to build more cars outside Germany for the first time.

Audi started assembling the A3 compact at VW’s plant in Sao Jose dos Pinhais in the Curitiba region in 1999. Production was ceased in 2006 due to poor sales and will now be resumed.

The VW unit is building its second Chinese plant in Foshan to foster growth in its largest single market. It also invested more than 900 million euros to expand its factory in Gyor, Hungary. The project more than triples the site’s annual car production to 125,000 vehicles.

Audi in May broke ground on a $1.3 billion factory in San Jose Chiapa, Mexico, to produce some 150,000 sport-utility vehicles from 2016 on and narrow the gap to BMW and Mercedes in North America.

Audi’s global sales gains in recent years were mainly driven by growth in China, where it outsells its peers thanks to an early market entry by Volkswagen.

Sales and profits from Audi are vital for Volkswagen’s goal of overtaking General Motors Co. (GM) and Toyota Motor Corp. (7203) to become the world’s biggest automaker by 2018. As part of the plan, Audi aims to dethrone BMW as the world’s bestselling luxury car maker by the end of the decade.

To contact the reporters on this story: Christoph Rauwald in Frankfurt at crauwald@bloomberg.net; Anna Edgerton in Brasilia at aedgerton@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net

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