BMW plans to build a new assembly plant in Brazil, to capitalize on the growing market for luxury cars in Latin America’s largest economy.

BMW chief financial officer Friedrich Eichiner told Reuters that the carmaker is currently negotiating terms with the local government.
“We are on track and will now submit an investment plan with the Brazilian government,” Eichiner said on Thursday. The executive declined to provide details on the size of the investment pending the conclusion of negotiations with the government.

According to company sources, BMW’s decision ends months of uncertainty caused by the Brazilian federal government’s plan to institute additional barriers to trade, which would have made BMW’s investment plans unprofitable. Brazil increased a tax on imported cars by 30 percent late last year to discourage imports.

The government has since said it will toughen up the rules for automakers wanting to qualify as domestic producers from 2013, requiring them to spend more on local research and development and assemble at least two-thirds of their output locally, as well as meeting the existing requirements for procuring parts locally.

BMW has set its eyes on two sites for the new plant, the province of Sao Paolo or Santa Catarina. The German carmaker’s plans to examine local production in Brazil were first announced in March 2011.


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