Despite the rising costs in Brazil, Renault will still expand the capacity of its plant in this country by 25% to 500,000 engines a year by 2013. It appears that Renault is even extending several of its recent investments amid worries about Brazil’s economy. For this plant expansion, Renault will spend 40 million reais ($19.5 million).
The complex had rolled out around 336,000 engines in 2011 for vehicles built by Renault and partner Nissan Motor Co. all over Latin America.
Last year, Renault’s top exec in Brazil, Olivier Murguet, announced a 500 million real ($244 million) investment to expand the production volume at the complex. Murguet said back then the rising costs were adversely affecting the competitiveness of manufacturing in Brazil as well as raising doubts about future investments.
At the inauguration of a steel cutting line in the southern state of Parana, Murguet said that the company would probably not be so aggressive now if those investments hadn’t already been made. Renault’s comments were made just as several automakers in Brazil have postponed new investments and suspended some of their production lines after sales in the first half have been reported to have slowed down considerably.
Automakers are not sure if the government, in its current efforts to drive the stuck economy, would decide to extend tax breaks and industry incentives. Regardless of what Renault decides, it continues to depend on growth in emerging markets like Brazil to offset falling sales volumes in Europe, where auto sales are suffering due to an ongoing debt crisis.