Car firms make inroads in Brazil

An electric bus made by BYD Co Ltd makes its debut in Rio de Janeiro. The Chinese auto company is making inroads into South America with a new plant in the city of Campinas, Brazil. Building the plant, BYD's first in the region, will cost about $90.2 million. The facility is slated to open in 2015. [Photo/Xinhua]

Chinese automaker BYD Co Ltd is making inroads into South America with a new plant in the city of Campinas, Brazil.

The cost of building the plant, BYD's first in the region, will be about 200 million reais ($90.2 million). It is slated to open in 2015.

"In the first year of operation, the plant will have a maximum production capacity of 1,000 electric buses, as well as all of their batteries," said BYD Brazil's General Manager Tyler Li.

The vehicles are expected to be sold in local markets or exported to other countries in the region.

The Shenzhen-based automaker also plans to eventually open a research and development center in Brazil for its photovoltaic, smart-grid and LED lighting businesses.

BYD's move is among the latest efforts of Chinese automakers to enter the Latin American market.

Chery Automobile Co Ltd will start production of three models at its $400 million plant near Sao Paolo in July, the company said.

The Anhui province-based company is also planning a research and development project to support its local plant, which has a projected capacity of 100,000-150,000 vehicles a year.

Chery expects its sales in Brazil this year to surge by 30,000 units.

Zhejiang Geely Holding Group also plans to form a joint venture in Brazil, aiming to acquire a greater market share in the country through locally produced vehicles.

The investment needed is estimated at 650 million reais, and the venture would produce 100,000 vehicles annually, according to the company.

Experts say local production will go far in helping Chinese automakers get established in the country.

"Local production efforts will help them avoid high taxation and firmly establish themselves in the markets in the long run," said Cui Dongshu, deputy secretary-general of the China Passenger Car Association.

Cui said a weakened Brazilian economy and taxation policy changes have caused a serious decline in the number of Chinese passenger vehicles and trucks imported to the country.

For the period from January to April, Chinese automobile exports to Brazil fell by about 50 percent, from 9,585 vehicles in 2013 to 4,767 this year, according to the association.

Statistics from the National Federation of Automotive Vehicle Distributors in Brazil showed that in the first five months of 2014, total automobile sales dropped to 1.4 million units, down 5.5 percent year-on-year.

In the first half of 2013, Chery's sales in Brazil dropped by 72.5 percent from a year earlier to 2,504 units, according to the company.

Brazil tightened its tax policy on imported vehicles in September 2012 to protect the local automotive industry.

The government raised taxes by 30 percentage points on imported cars and trucks, as well as those produced in Brazil and other Mercosur trade bloc countries that failed to meet the 65 percent localization rate.

"The high tariffs on imported vehicles have led to an erosion of the low-price advantage that China-built vehicles hold," said Namrita Chow, principal analyst at the IHS Automotive consulting firm in Shanghai.

"They need local production if they are serious about winning more market shares from existing and new players," Chow said.