Automakers still confident in Brazil, but Mexico has the upper hand image

Brazil is now faced with three years of declining sales and with voices in the industry claiming that unused production capacity could be above 50% in 2015. Still, automakers are ready to endure the beating in hope of better prospects in the near future.

Although currently the market – with Brazil being the largest economy in South America – is anything but a success story, the carmakers have faith in its auto industry. They are willing to pledge more than $30 billion by 2018 to increase production capacity at existing facilities or build new plants.

Still, the yield prospects are tailored to the current situation: BMW for example only spent $250 million for a new factory in the country, which opened earlier this month and could reach an output of 32,000 units per year during the next three to four years. That compares to a $1 billion investment in Mexico to construct and operate a plant that could churn out of its production lines 150,000 vehicles before the decade ends.

Nissan and Mercedes-Benz have also revealed plans to build new facilities in Brazil, valued at a total of $1.2 billion, but they also pledged another $1.4 billion on a joint venture in Mexico on top of the Japanese automaker’s $2 billion plant that is already producing cars.

The global players do not ignore Brazil because it’s a huge market – currently the world’s fifth largest, but executives say the country’s rising costs, inadequate infrastructure and a general lack of trade agreements make the country a poor export hub.

Via Automotive News Europe