General Motors (MTLQQ), or GM, has announced its plan to invest R$700 million ($385 million) at its Sao Caetano do Sul plant in Sao Paulo state in Brazil to modernize and expand production. This comes on top of an investment of R$1.4 billion on the same plant announced in March of this year.
The investments will focus on renewing the Chevrolet production line, produce two new models and boost overall output. The plant also manufactures models including Classic, Corsa and Vectra.
The investments are a part of GM’s plan to increase production capacity and refresh its Chevrolet models in Brazil — its third largest market after the U.S. and China. The plan entails an investment of R$5 billion ($2.75 billion) and would run until 2012.
Brazil – Latin America’s largest economy – is a major market for Italy’s Fiat, Germany’s Volkswagen AG, U.S.-based automakers General Motors and Ford Motor Co (F) and Japan’s Honda Motor Co. (HMC).
Last year, Fiat occupied the dominant position in the Brazilian auto market with 24.49% share, followed by Volkswagen with 22.74% share, GM with 19.79% share, Ford with 10.1% share and Honda with 4.18% share.
Together, GM, Volkswagen and Ford plan to invest a total of R$14.2 billion ($7.8 billion) over a span of years to strengthen their position in Brazil by enhancing production capacity and developing new products.
Recently, Ford has announced its plan to invest $200 million in Brazil over the next 5 years on top of an investment of $2.2 billion announced last year. The new investment is aimed at developing a new Ford EcoSport small sport utility vehicle (SUV) for the global market.
Auto sales in Brazil have been significantly helped by government tax incentives that lowered car prices and lured consumers to showrooms. In 2009, Brazil’s auto sales rose 11.4% to 3.14 million vehicles. But the tax breaks expired in March this year and the government has no plans for renewal.
However, the Brazilian automobile dealers’ association believes automobile sales in the country will grow 9% in 2010 due to a strong rebound in the country’s economy. Brazil’s economy is forecasted to grow 5.2% this year in sharp contrast to a fall of 0.24% in 2009, according to a report by the Central Bank of Brazil.
Read the full analyst report on “GM”
Read the full analyst report on “F”
Read the full analyst report on “HMC”
Zacks Investment Research
