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Mercedes Considering Production of Luxury Cars in Brazil

Aug. 5 (Bloomberg) -- Daimler AG’s Mercedes-Benz brand is considering building cars in Brazil to avoid import taxes and serve a growing number of affluent customers in South America’s biggest economy.

“As part of our growth strategy we are constantly reviewing our global production network and in this context we’re also examining the financial feasibility of a local car production in Brazil,” Daimler spokesman Martin Steinlehner said by phone today. No decision has been made, he said.

Local production in Brazil is becoming increasingly common to avoid import taxes imposed by President Dilma Rousseff, who aims to boost manufacturing in the country. An expansion by German automakers in South America is also meant to help offset declining demand in their home region, where sales are set to slump for a sixth straight year.

Mercedes, the third-biggest maker of luxury cars, would be following No. 1 luxury automaker Bayerische Motoren Werke AG in setting up a factory in the country. The Munich-based company plans to start building vehicles in Brazil’s southern state of Santa Catarina in 2014, the manufacturer announced last year.

BMW is investing 200 million euros ($266 million) to keep ahead of Mercedes and Volkswagen AG’s Audi unit, which is also considering producing cars in the country. Audi, currently second in global luxury car sales, and Mercedes have both vowed to dethrone BMW by the end of the decade.

Brazil Expansion

Mercedes plans to start making its mid-sized C-Class model in Brazil starting in 2015, Spiegel magazine reported yesterday without citing where it got the information. The Stuttgart-based carmaker is aiming for an initial annual production of 20,000 vehicles, the magazine said.

BMW is planning capacity of 30,000 vehicles in Brazil. Audi plans to produce 150,000 cars annually at its new plant in San Jose Chiapa, Mexico. Demand for high-end vehicles in South America’s biggest economy is expected to grow amid rising wages and as the country invests to host the soccer World Cup in 2014 and the Summer Olympic Games in 2016.

Mercedes already builds heavy-duty trucks and buses in Brazil at facilities in Sao Bernardo do Campo and Juiz de Fora, which was converted from making cars in 2011.

To contact the reporter on this story: Dorothee Tschampa in Frankfurt at dtschampa@bloomberg.net

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

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