Volvo Car Corp., recently acquired by China's Zhejiang Geely Holding Group Co. from Ford Motor Co. (F), plans to build its first Brazil factory to produce between 15,000 and 20,000 cars a year in the country, the company press office said.
But the final decision depends on Brazil's approval of the final details about auto-industry rules that go into effect starting next year. To protect its auto industry from a flood of imports, Brazil's government boosted taxes on cars by 30% last year, with exemptions granted to cars with a specific amount of locally produced content. Starting next year, auto makers that build locally, invest in local research and development, and purchase Brazil-made parts will also be exempted from the higher tax.
That has driven a number of companies--especially Asian auto makers that have been taking market share away from established auto makers such as Fiat SpA (FIATY, F.MI), Volkswagen AG (VLKAY, VOW.XE), General Motors Co. (GM) and Ford--to announce that they will build factories in the country.
Volvo's plan to build a factory was earlier reported on the blog of Brazilian journalist Joel Leite, who interviewed the Brazilian head of Volvo Cars. Volvo's Brazil press office confirmed the report details.
According to Paulo Solti, president of Volvo Car da America Latina, the factory would take 24 months to build and would start production in 2015.
The company has yet to decide on a location, but because the company sells cars in mainly the wealthier southern regions of Brazil, it likely would build a factory in Sao Paulo or Parana, according to Leite.
