Sticking with a strategic mandate that "production follows the market"—and with a jumpstart from the Brazilian government in the form of its recently adopted ‘Inovar Auto’ legislation—BMW Group has submitted an investment proposal to Brasilia to build a planned $260-million auto plant slated to begin production in 2014.
"Brazil is a market with tremendous potential for the future for the BMW Group," Ian Robertson, a member of BMW’s management board who’s responsible for sales and marketing, said in a statement. "For that reason we are strengthening our long-term commitment to this country. This will create the 
necessary conditions for us to maintain the balance of sales between Europe, Asia and the Americas."
Munich-based BMW Group said current plans call for the plant to produce about 30,000 vehicles annually and create more than 1,000 new jobs at the production site in addition to those generated within the larger supplier network. Negotiations with the state government of Santa Catarina are said to be "already well underway" for the facility’s construction in the Joinville region, a major financial and commerce center close to the Atlantic coast.
Locating the new plant in Brazil will position BMW to tap into what PricewaterhouseCoopers (PwC) described in a May 2012 Autofacts analyst note as the fourth largest auto sales market globally. From 2005 to 2011, PwC pointed out, the Brazilian market averaged 12-percent annual growth while auto imports into the country experienced a "staggering" 46-percent annual growth rate.
By 2011, imports accounted for 25 percent of Brazil’s domestic auto sales, a market share considered too big by the Brazilian government, which, in a move to increase the competitiveness of the country’s auto sector, enacted new legislation April 3, 2012, that imposed a 30-percentage point increase in the industrial taxes (IPI) on cars imported from outside of Mercosur (Argentina, Brazil, Chile, Uruguay and Paraguay. The policy, commonly known as Inovar Auto, also outlines the requirements that, in turn, will grant automakers IPI tax credits.
Beginning next year, companies must be compliant in three of four categories (R&D and innovation; engineering, basic industrial and supplier development; manufacturing steps; and tagging) to qualify for the program. The criteria of each of the categories will become increasing stringent until 2017. Additionally, to avoid paying the 30-percent IPI, each automaker will need to increase its volume of strategic supplier purchases. The larger the buy within the country, the greater the benefit the auto company will receive.
BMW Group, which sold a total of 15,214 vehicles in Brazil last year, said it welcomed the new framework for investments in Brazil. Its addition of a plant there will extend the group’s production network, which currently counts 29 production and assembly facilities in 14 different countries. The company has been manufacturing BMW motorcycles at its Manaus, Brazil, location since 2010. (jisenberg@amm.com)