BMW will construct a new car assembly plant in Brazil, with hopes that it will benefit from the emerging market for luxury cars in the largest economy in Latin America. Finance chief Friedrich Eichiner said last Thursday that the company is on course with its plan and is prepared to file its investment plan with the government in Brazil. He didn’t offer information about the size of the investment while talks with the government are ongoing. According to Brazil's trade minister Fernando Pimentel when he was interviewed on local radio, BMW will make an announcement within days about this plan. For several months, it was unsure whether this plant will be put up. Sources said that Brazil's government had begun to implement more obstacles to trade that may mean that BMW's investment plans would be unprofitable.
Last March, BMW threatened to withdraw the plan after Brazil imposed a new import levy in December. BMW estimated that this would raise the car’s price by 30%. Since then, the government and BMW have been in talks over the number of local components required to classify the vehicles as built in Brazil. In a previous statement, production chief Frank-Peter Arndt has said that BMW will begin with an assembly operation where cars are built from "completely-knocked-down" kits composed of major component groups.
This is a common first step to get round import duties and reduce financial risks when entering a market that has yet to be tested. The volumes could be as low as the 2,000 units that BMW began with initially at its assembly plant in Chennai, India, in March 2007. It had an initial investment of less than 20 million euros ($26.18 million). Its smallest full-scale manufacturing plant is Rosslyn in South Africa, with over 53,000 cars built last year. Arndt said that the Brazil plan originally meant that it will select a location either in the province of Sao Paolo or Santa Catarina. Eichiner has declined to say if this plan has changed.
