Brazil to Become in a Decade World’s 3rd Largest Car Maker, Ahead of Japan

    Brazil's Volkswagen

    Brazil's Volkswagen Car production capacity in Brazil should jump from the current 3.6 million units per year to 6.2 million by 2025 supported by massive investments from the industry estimated in US$ 19 billion by 2017, according to estimates from the Vanzolini Foundation in São Paulo.

    If this is confirmed the South American trade block Mercosur with Brazil would become the third-largest manufacturer of the world behind China and the United States, and ahead of Japan.

    New manufacturers, mainly from South Korea and China, will play key roles in this development. Only in new factories, investments will amount to US$ 5.22 billion, according to Brazilian magazine Isto É . The remainder, about US$ 14 billion will be mainly spent in the expansion of existing plants of Volkswagen, Ford, General Motors and Fiat.

    The latest to join the rush is China’s JAC Motors, which together with Brazilian importer of JAC vehicles SHC, plan to invest US$ 600 million to build a factory in Brazil, SHC President Sergio Habib said on Monday.

    The factory, with an annual capacity of 100,000 cars, will begin operations by 2014, Habib said. SHC will account for more than half of the investment, Habib told reporters in São Paulo.

    China’s Chery Automobile last month laid the cornerstone for its first manufacturing plant outside of its Asian home country, and South Korea’s Hyundai Motor Co. began construction of its 600 million dollars assembly plant in February. Japan’s Nissan Motor Co. and Honda Motor Co. also have announced new investments in Brazil, currently the world’s fourth-biggest market by sales last year.

    However the executives of German and US automakers, established decades ago in the country view the newcomers with suspicion.

    The president of General Motors of South America, Jaimes Ardila, stated: “Let’s see if they will be competitive with the cost of producing in Brazil”. Undoubtedly, the cost to produce in Brazil is higher if compared to China. However, companies avoid 35% taxes on imports and logistics expenses with local production.

    According to Luis Curi, CEO of Chery Brazil, “It takes about four months between the order and final placing of the vehicle in Brazil”.

    Because of multilateral agreements, cars produced in Brazil can be exported without taxes to Argentina, Colombia, Chile, Venezuela, Paraguay and Uruguay, all members or associates of Mercosur.

    Brazil also has an agreement with Mexico, signed in 2002, that waives import taxes on vehicles. In relation to other Latin American nations, Brazil’s main competitive advantage is, unquestionably, its huge domestic market, comprising 150 million consumers.

    Answering skeptical people who may affirm the Brazilian market will be saturated with such an expansion in such a short time, Cledorvino Belini, Fiat’s president in Brazil was defiant and confident.

    “In Brazil there is one car for every seven people, while in the U.S. this ratio is one to two.” Nobody imagines that Brazil will match this US proportion in the near future but it does illustrate Brazil’s prospects for the medium and long-term.

    Wind Farms

    Elecnor, a group from Spain, is building more wind power plants in Brazil’s southern state of Rio Grande do Sul totaling an estimated 300 MW. The undertaking was boosted by funding from Brazil economic and social development bank, BNDES.
     
    The funds for subsidiary Enerfin amount to 445 million reais (about US$ 284 million) in 16 years and covers the last three awards won by the group in Brazil, totaling 150 megawatts of wind power.

    Specifically, the wind farms of Leilões (96 MW in 2009 and 46 MW in 2010) and the wind farm Palmares, with an additional award 8 MW.

    Of the 150 MW, located in the state of Rio Grande do Sul, 30 MW are already in operation, while commissioning of the remainder is expected between this year and next.

    The addition of these new and previously developed MW increases the total wind power in Brazil from Elecnor to 300 MW

    Mercopress

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