After Mercedes, Audi Expected to Close Production in Brazil

RIO DE JANEIRO, BRAZIL – After Mercedes-Benz officially announced an end to car production in Brazil, Audi should be the next to disable its assembly line in Paraná state. The reason is essentially the same: the end of incentives for local manufacture of luxury cars.

Premium automakers – Audi, Mercedes and Jaguar Land Rover – settled in the country soon after the announcement of Inovar-Auto, a federal government program that established several rules for the sector. The main one raised the Tax on Industrialized Products (IPI) for imported cars by 30 percentage points.

Currently, Audi no longer produces the A3 Sedan in São José dos Pinhais-PR, where it used the same assembly line as the VW T-Cross, for instance, as well as the former Golf.

The model was discontinued in late September, given the fact that it was outdated in relation to the European one, which should be imported. However, production may return should the government return the IPI credits, honoring the previous agreement.

Nevertheless, Audi is not the only one waiting for the funds. BMW and Mercedes-Benz also have subsidies to collect in Brasília, totaling R$290.7 million.

The current federal administration has no clear policy for the automotive sector and does not seem interested in establishing an industrial policy.

Although the amount, divided among the three brands, is not significant, the refund would show, according to the manufacturers, that the current government is reliable for the release of new investments in the country.

With no predictability, Ingolstadt-based Audi will hardly release funds to resume production. Although Mercedes-Benz has not directly mentioned its share of IPI credits, the imbroglio may have helped to close the operation earlier.

Of the three, BMW is the only company still holding its ground in Brazil, producing a number of models in the country, such as the X1, X3 and X4. The manufacturer also has a BMW motorcycle facility in Manaus and even signals record sales in 2020.

Audi expects the government to define a policy for low volume production. Another company also slowing its production of luxury cars is Land Rover in Rio de Janeiro, where only the Discovery Sport is manufactured and at a very slow pace.

If the situation persists, Mexico may be the solution to meet the Brazilian demand, moving assembly lines to the country and helping supply the American market.

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