BMW confirms plan for Brazilian assembly plant amid new import rules
BMW will submit an investment plan to the Brazilian government after months of uncertainty caused by higher import taxes and stricter local production requirements.
BMW has confirmed it will proceed with plans to build an assembly plant in Brazil, ending months of speculation over whether the German carmaker would commit to local production in Latin America’s largest market. The company will submit an investment plan to the Brazilian government, according to chief financial officer Friedrich Eichiner.
Eichiner said BMW is currently negotiating terms with the government and declined to provide details on the size of the investment until talks are complete. The move comes after Brazil increased the tax on imported cars by 30 percent in late 2011, making it more costly for foreign manufacturers to sell vehicles not produced locally. The government has since announced that, from 2013, automakers must assemble at least two-thirds of their output in Brazil and increase spending on local research and development to be classified as domestic producers and avoid the higher tax.
Brazil’s changing rules for automakers
The stricter requirements, which also include sourcing more parts locally, forced BMW to reconsider its initial approach. According to company sources, the threat of unprofitable operations under the new tax regime delayed a final decision on the plant. BMW first announced plans to explore local production in March 2011, but the policy changes prompted a review of the business case.
The Brazilian government’s aim is to encourage foreign manufacturers to invest in local facilities and supply chains rather than relying on imports. Other global carmakers have faced similar pressures, with some choosing to delay or alter their investment plans in response to the evolving rules. Jaguar Land Rover, for example, postponed its own Brazilian plant project after a tax incentive ruling, as covered inJaguar Land Rover Halts Brazilian Plant Plans After Tax Incentive Ruling.
BMW’s site options and next steps
BMW is evaluating two potential locations for the new plant: the province of Sao Paolo and the southern state of Santa Catarina. No final decision on the site has been announced. The company has not disclosed details of production capacity, models to be built or job numbers, pending the outcome of negotiations with Brazilian authorities.
BMW’s confirmation signals renewed commitment to the Brazilian market after a period of uncertainty. The company’s decision will be closely watched by rivals considering their own local manufacturing strategies in South America.
