Audi Will Return to Local Production in Brazil

Volkswagen AG's Audi unit says it will relaunch car assembly in Brazil in 2015 after halting manufacturing operations there seven years ago.

CEO Rupert Stadler tells reporters in Brasilia that the company will spend €150 million ($203 million) to prepare for local production at VW's manufacturing complex in Sao Jose dos Pinhais of the brand's A3 small sedan and Q3 compact crossover vehicle.

Stadler did not reveal the capacity of the Brazilian facility. But he did say Audi intends to double the size of its dealer network in the country by the end of the decade in a bid to become the market's best-selling luxury brand.

Brazil's entire premium-car market totaled only about 38,000 units in 2012, according to The Wall Street Journal. Audi projects the segment will expand to 100,000 vehicles by the end of this decade.

Audi's return to local production is in part a defensive move to protect its market share. A year ago Brazil raised taxes by 30 points on imported cars. But it also offered discounts if carmakers also built more vehicles locally. The Journal says a quota system currently limits Audi imports to about 4,000 cars per year.

Audi isn't alone in establishing local output. BMW intends to open a €200 million ($148 million) plant in Brazil next year with capacity to make 30,000 vehicles annually. Daimler also plans to decide this year about opening a factory there.