September 17, 2013 11:20 pm

VW targets new rich with plan to build luxury cars in Brazil

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Volkswagen is to restart production in Brazil with plans to build its luxury Audi cars in the country so as to target the nation’s increasingly affluent consumers.

Rupert Stadler, chief executive of Audi, said on Tuesday that the German company would invest about €150m in Brazil by 2015 to produce its A3 and Q3 models.

“By producing in Brazil, we will create the basis for further growth in the region,” Mr Stadler said, after a meeting with Dilma Rousseff, the country’s president, in Brasília.

The announcement comes more than a decade after Audi entered the Brazilian market for the first time in 1999, producing the A3. However, it halted its assembly line in 2006.

After re-establishing production in Brazil, Audi plans to produce cars in Mexico in 2016, he said.

The investment is intended to help Audi catch up with rival premium carmakers in Brazil, such as BMW, which are looking to profit from a surge in the number of wealthy individuals.

Brazil’s recent private equity boom, which has poured billions of dollars into the pockets of investors, as well as a decade of relatively strong economic growth, has created an attractive market for luxury goods.

In spite of the country’s economic slowdown over the past three years, total assets under management have surged from R$936bn in 2006 to over R$2.4tn in July this year, according to the Brazilian Financial and Capital Markets Association, Anbima.

In October BMW announced it would invest €200m on a factory in Brazil’s southern state of Santa Catarina, with the view of starting production late next year. It said it planned to produce 30,000 vehicles in the country per year.

Mr Stadler did not disclose how many cars Audi intended to produce in Brazil but said it planned to more than double its dealer network by the end of the decade. “In Brazil, our goal is to lead the premium segment,” he said.

While Brazil’s luxury market has become more attractive over recent years, foreign carmakers have also been encouraged to set up local production as a result of higher taxes intended to discourage imports.

Under the country’s five-year Inovar-Auto programme finalised last year, the government introduced tax breaks for foreign companies on the condition that they move some of their production onshore, as well as invest in local research and meet strict environmental targets.

Fernando Pimentel, Brazil’s trade and industry minister, heralded Audi’s announcement as proof that the Inovar-Auto programme was working.

“Brazil never had factories in the premium car segment, and now three have been announced and another one is expected,” Mr Pimentel said.

Carmakers have been a key focus of Brazil’s ruling PT party as a source of job generation. Since 2002, Brazil’s fleet of vehicles has more than doubled to nearly 79m and in 2010 the country overtook Germany to become the world’s fourth largest car market.

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