Renault-Nissan Plans for Expansion in Brazil

By Anna Fitzpatrick, Contributing Reporter

SÃO PAULO, BRAZIL – French-Japanese car manufacturing company Renault-Nissan announced last week that it will be opening a second manufacturing plant in Rio de Janeiro state and expanding production at its current plant in Paraná. CEO of the company Carlos Ghosn was in Brasília earlier this month, meeting with President Dilma Rousseff to discuss plans for expansion.

Brazilian-born Ghosn is keen for the company to become a prominent player in the Brazilian market, and with the expansion he and Renault-Nissan “expect Brazil to become the number two market for Renault after France,” he told Rousseff.

“We have set a goal to double our market share by 2016, to exceed thirteen percent. Renault aims to exceed eight percent, and Nissan five percent,” said Ghosn at the meeting with the President.

The investment is worth R$2.6 billion and is expected to create at least 2,000 new jobs at the new plant alone. The existing plant in Paraná will be expanded and a new plant in Resende in Rio de Janeiro will be opened and developed to manufacture new products, with production scheduled to begin in the first half of 2014.

Today, much of the Nissan vehicles sold in the country are imported from Mexico and only four models (about 59,000 units) are made locally, associated with the Renault factory in Pinhais, Paraná. This factory will see further investment of R$1.5 billion, which will be used to increase production from 280,000 vehicles to 380,000 vehicles.

The move came after changes in September in the rate of IPI – the tax paid on industrialized products, which the government is harnessing to improve the competitiveness of Brazilian carmakers and stimulate production.

To ward off the competition from the increasing number of imports, the tax will increase the cost of cars that are produced overseas. Any cars that are produced outside of Mercosur or Mexico or that have less than 65 percent local components will be taxed another thirty percent.

Brazil is hoping for more investment in the car industry from China, which currently exports cars to Brazil pre-assembled. Already Chery – the Chinese car giant – has agreed to start a production plant in Jacareí in São Paulo in 2013.

Another Chinese car maker, JAC Motors, is understood to be in negotiations to open a factory in Bahia – one way for companies to avoid the new, higher rate of IPI.

Ghosn sees the Brazilian car market as one to watch in the future, and is right to do so. The expectations are that Brazil will overtake Japan as the third largest automobile market after the U.S. and China.

The company’s strategy in Brazil is in line with their commitment in BRIC countries, having also invested in China, Russia and India. Renault plans to launch a further thirteen new models in Brazil from next year to 2016 and double the number of dealerships in the country.

The plant in Paraná has been producing vehicles since 1998 and is the fifth largest producer in the highly competitive market after Fiat, Volkswagen, GM and Ford. Amidst the activity sales of vehicles in Brazil fell 4.9 percent in September 2011, according to the National Association of Vehicle Manufacturers (Anfavea).