Mercedes-Benz has broken ground on its BRL500-million ($183 million) new car plant in Iracemapolis, Brazil. The German luxury carmaker will commence production of the C-class sedan at the site early 2016, with the output of the GLA compact crossover to follow months later.
In a statement, Mercedes said that initial phase will target an annual capacity of 20,000 vehicles, with possibility of a further significant expansion if the market “develops as it hopes." Mercedes production chief Markus Schaefer said in the statement that local production will enable it to better tap the potential of the emerging Brazilian market and to respond more flexibly to the customers’ wishes.
The level of automation at the Iracemapolis site will be significantly lower than in traditional Mercedes site, with around 600 jobs to be created at the site and another 3,000 to be generated by regional suppliers and service providers. Carmakers in Brazil sold 3.3 million light vehicles sold in 2014, making the country the world's fourth largest market after China, the United States and Japan.
The luxury car market, however, only accounts for about 1 percent of sales, partly because of the heavy tariffs levied on imports. Likewise, driving a luxury car in a country known for social violence could pose a problem.
Mercedes joins fellow German luxury carmakers and rivals BMW and Audi in setting up production in Brazil to take advantage of expected premium car market growth and to avoid high import tariffs.