The luxury car segment was the sole bright spot in the Brazilian auto market in the first quarter of 2014 as tax incentives lured wealthy customers into racking up Mercedes-Benz and BMW vehicles in the quarter. The segment gained 32 percent in the first quarter while total vehicle sales in the country dropped 5 percent, according to two local auto associations.
Luxury brands have been focusing on entry-level premium cars like the Mercedes-Benz A class 200 Turbo hatchback that features a tag of BRL111,000 ($49,471). Such price level would be more less similar to the tags of Toyota Corollas (BRL93,000) and Honda Accords (BRL120,000), promoting rich Brazilians to consider luxury vehicles instead of volume cars.
Dimitris Psillakis, managing director of passenger cars at Mercedes-Benz in Brazil, remarked that the brand entered into a segment of new clients in regards to style and price.
The lower price of luxury cars is attributed to tax breaks on imported vehicles granted to premium carmakers that have vowed to build cars in Brazil, like Mercedes’ parent Daimler and BMW. Flavio Meneghetti, president of the car dealership association Fenabrave said that the Brazilian auto market has demand for luxury vehicles.
He added that the Mercedes and BMW brands have hike the volume of sales in the entry-level luxury segment. Brazil is expected to post lower economic growth this this to 1.8 percent, but that failed to deter carmakers to make their bet on what is considered as the largest economy in South America.
Arturo Pineiro, chief executive officer of BMW in Brazil, said that the carmaker’s decision to invest EUR200 million ($276 million) in its first Brazilian site is something that goes beyond the current economic instability in the country. BMW's Brazilian site will commence output production, to be followed by Audi, Jaguar Land Rover and Mercedes. [source: BusinessWeek]