By on October 19, 2012

With Brazil’s national auto policy finalized, BMW has decided to go ahead with plans for an assembly plant in the country.

With sales of BMW cars up since 2009, a local factory seemed like a solid idea. But an import levy that added 30 percent to the price of a new car threatened to derail the project as late as December, 2011. According to Reuters, the Brazilian government and BMW are reportedly in talks to hammer out details regarding local parts content, and how much of it will qualify the cars as “Brazilian made”.

In the past, BMW had discussed assembling cars via CKD kits, which could allow them to test out local production without incurring significant financial risks. BMW uses local production of CKD kits in markets like Thailand, Russia, and India to produce the 3,5 and 7-Series cars for those markets.

 

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14 Comments on “BMW To Build Plant In Brazil After New Laws Finalized...”


  • avatar

    no ckds allowed. if they build ckds the resulting product must be exported as it cannot be sold here.

    looks like mini is a contender to be the first cae built at bmw brasil.

    • 0 avatar

      Marcelo, got a link? I have someone who can translate even if its in Portuguese.

      • 0 avatar

        Hi Derek,

        Ask and ye shall receive…

        on BMW factory:
        http://invertia.terra.com.br/carros-motos/noticias/0,,OI6237881-EI19500,00-Ministro+BMW+anunciara+fabrica+no+Brasil+nos+proximos+dias.html

        A little older news, but on Mercedes and it explains how ckds must be drawnback:
        http://revista.webmotors.com.br/mercado/mercedes-investira-r-40-milhoes-na-fabrica-brasileira/1333999232464

        An interesting tidbit on how Nissan is the first to comply with new rules and how it gets back taxes as it builds its new factory (stand alone as they already share one with Renault)in Rio:
        http://invertia.terra.com.br/carros-motos/noticias/0,,OI6240981-EI19500,00-Nissan+e+montadora+habilitada+no+novo+regime+automotivo.html

  • avatar
    Tstag

    JLR are also planning the same ways as BMW.

  • avatar
    tced2

    “Brazil’s national auto policy” is apparently high tariffs or closed market.

    • 0 avatar

      And apparently it’s bringing more factories and jobs. albeit at a higher price to consumers.

      • 0 avatar
        th009

        Any new developments on the “free trade” with Mexico?

      • 0 avatar

        Hi th009!

        So as to not run afoul of the WTO, everything is the same. That is, everything’s the same in theory ’cause the reality is that Brazil has re-defined the terms of the agreement and Mexico and the assorted makers went along with it.

        In brief: high level Brazilian delegations were sent to Mexico and made clear that Brazil did not find the deal satisfactory anymore. Brazil made clear that it would break off the agreement if Mexico didn’t go along. Mexico let Brazil have its way.

        So now, makers have quotas they can bring in from Mexico. These are complicated but basically it means, the more cars you build in Brazil, with Brazilian-made components, the greater the number of cars you can bring in. This is not mandatory but the carrot are tax breaks and easy credit ectended to those who follow the rules. All, and I mean all makers, have bowed to guv pressure.

        And that’s how it stands right now.

      • 0 avatar
        th009

        Thanks! That sounds not-so-limiting for Fiat and VW (which build a lot of cars domestically), but maybe not so good for Nissan, Ford or others, who would need to limit their imports. Is that roughly correct?

      • 0 avatar

        Hey!

        The Big Brazilian 3.5 (Fiat, VW, GM and Ford – which earned the 0.5 as they’re almost being overcome by Renault) are the biggest importers into Brazil that’s for sure.

        Quick, off the top of my head, they import:
        Fiat – 500 and Freemont (re-badged Journey)
        VW – Tiguan, Touareg, Passat, Jetta
        GM – Captiva, Camaro (just for show)
        Ford – Fusion and Edge (which comes from the US I believe)

        In spite of the large sales of Fiat, they seem to be the most impacted of the traditional makers. As they import only 2 models, these models have all but extinguished their quotas and I was told the 500 and Freemont should all but disappear from dealers over the next couple of months. That is quite ironic as Fiat was one of the main pushers behind the guv’s action ’cause when the guv started making the moves that would result n the present action, the 500 was still made just in Poland and the Journey hadn’t been Fiat-alized. Karma is a b*, indeed.

        Also interesting to note is that, in Brazil, Fiat was able to strongarm and beat down VW as VW was against the quotas. Fiat allied itself with steelmakers, Marchionne flew down here and threatened to cut investments and fire people, and Fiat defeated VW, with discreet support from GM. Ford apparently stood by the sidelines and didn’t choose sides in this case.

        Of the non-traditonal 4, Nissan was the most affected. Their March was poised to break into the top 10 when the quotas were ‘negotiated’, as was the Versa. Now sales have been cut by almost 50%, but the fact remains that all cars that get here are pre-sold. Very difficult to walk into a Nissan dealer and drive of with one of those models as all have been spoken for.

        The Koreans and Chinese have also seen sales drop by 50% or more.

        So, except for Fiat, it’s working like it was intended.

      • 0 avatar
        th009

        I figured Nissan would be hit badly as they don’t have the domestic production to make up for Mexican imports. Fiat should have a bigger quota but maybe the 500 and Freemont have been big sellers?

        For VW, the big difficulty would surely be the Mexican-built Jetta as the other three would be much more expensive and smaller sellers. And if they start building Mk6 Golfs in Mexico, as Winterkorn indicates, there won’t be quota available to bring them to the US.

        How is the capacity situation in the Brazilian plants? Is everyone running at capacity? Is there much active construction happening (as opposed to just press releases)?

      • 0 avatar

        Let me answer bit by bit.

        Yes, 500 and Fremont are big sellers. 500 sells from 1500 to almost 2.5. Some months it reached 3.5k. As it stands any lower trim one is grabbed up in seconds. Some of the higher trim levels sometimes languish a bit, but don’t believe it sits for more than a few weeks. Freemont is second in the segment it inserted itself in Brazil. Behind CRV, but ahead of various Mitsus, a Peugeot, the Dodge and some Jeeps. Ironically it is considered the only local car in this aspirational segment. That is a good thing for most, but a disadvantage for some snobs.

        As to VW, you are correct. The Jetta though is a relative low seller. The leadership in this segment is not defined yet. Corolla, Civic and Cruze are fighting it out. Jetta comes behind these cars. Remeber these car sell from USD 30k to USD45 in Brazil. In a good month they sell around 4k. The Jetta gets less than half. And you are correct. The others are bit sellers but VW think they do their image good.

        As to Golf, in BRazil the 4.5 generation Golf is still in production. It lags behind the Focus and i30, but does better than Bravo and C4. The 307 might be catching up to it and could become the 3rd biggest. Don’t forget the Cruze hatch that is a little more expensive than the rest. But is the ‘it’ car in the segment right now and growing.

        VW has not confirmed, but no ones thinks the new Golf will be made in Brazil. VW will have to keep imports of it in its quota. If it does well, possibly the Tiguan and Touareg could have less imports. There’s also the new Beetle..See why VW was against the quotas?

        Right now though VW has got a big line of credit to start production of the new Santana. In development, it should arrive in late ’13 or ’14 to compete with Logan, Versa, Cobalt, Siena. After that credit is spent, and depending on demand I bet VW will start thinking of producing the Golf locally as it would be the only way to try to lead in this segment again. As it stands this segment is a toss up between Focus and Cruze, with i30 and Golf falling behind.

        Asto capacity, Fiat is running full speed ahead. VW is too. GM has completely revamped its line up and production is going up as the transition is finishing. Ford can’t build enough of the small models to meet demand (in Bahia) though the plant is São Paulo surely has some underused capacity.

        Renault is also producing at full speed. Peugeot is running at less capacity than ideal, but the Citroens probably pick up the slack.

        The Japanese seem to be coming back to pre-tsunami levels, which means over 80%. Toyota in fact innaugurated a new factory for the Etios as the Corolla factory was using all its capacity.

        Under construction:
        Fiat in Pernambuco. Fiat in Minas Gerais is under constant strain and re-organization as it’s bursting at the seams.
        Nissan in Rio (saw pictues of bulldozers preparing the terrain). Nissan is in a big hurry to finish soon and says it could start production as early as late 2013)
        Ford in Bahia is expanding and modernizing the unit to produce new Fiesta and EcoSport there.
        GM has modernized factory in São Paulo to build new line as well as expanding the Rio Grande do Sul unit to produce Onix. In São Carlos the engine factory is being expanded.
        VW is deveopling and should expand one of their factories to accomodate new Santana.
        Hyundai factory has just come on-line (now 120 000 capacity, in a year 180000).
        Toyota ditto Hyundai (150 000 capacity).
        JAC and Chery (Chinese) have frozen construction though apparently, landworks have resumed at the JAC site in Bahia.

      • 0 avatar

        Oh th009, I almost forgot. Mitsubishi is also pumping money into its factory in Goiás. It’s a small factory and will be expanded to a mid-size one. In it they will produce the Lancer and ASX, besides the already produced L200.

  • avatar
    th009

    Thanks, Marcelo, for the comprehensive survey of auto manufacturing in Brazil! It’ll be interesting to watch over the next few years for sure, as the rest of Rousseff’s presidential term plays out.


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