Mercedes-Benz broke ground Thursday on its new car plant in Brazil, where it is investing 500 million reais ($183 million) to build its C-class and GLA models.
Mercedes joins rivals BMW and Audi in establishing production in Brazil to take advantage of expected luxury car market growth and to avoid high import tariffs.
Mercedes will start production of the C-class sedan at the factory early next year and production of the GLA compact crossover will follow a few months later, the company said in a statement.
"In the first stage we are aiming for an annual capacity of 20,000 vehicles," Mercedes said, adding that the factory has the potential for a further significant expansion if the market develops as it hopes.
"Local production will allow us to tap the potential of the emerging Brazilian market even better and to respond more flexibly to the wishes of our customers,” Mercedes production chief Markus Schaefer said in the statement.
The level of automation at the plant will be significantly lower than in traditional Mercedes plants, the carmaker said, adding that 600 jobs would be created at the site with another 3,000 expected to be generated by regional suppliers and service providers.
With 3.3 million light vehicles sold last year, Brazil is the world's fourth largest market after China, the U.S. and Japan. Its premium segment is fledgling in size, however, and represents only about 1 percent of sales, in part due to the heavy tariffs levied on imports.
Social violence remains an issue for the country so flaunting wealth by driving an expensive luxury sedan such as a C class can bring problems in Brazil.
Audi sales chief Luca de Meo told the Automotive News Congress in January that there is a growing trend toward premium car buyers living behind fences, such as Sao Paulo’s Alphaville, the biggest gated community in the world with 50,000 people. These kind of customers would need multiple cars, he said, including a small autonomous driving car to move around within the community as well as a fast cruiser for whenever they leave.
BMW, Audi production
BMW launched inital production at its new 200 million euro factory in Brazil's southern state of Santa Catarina in October. The automaker plans annual production of 30,000 when construction is complete by September. The factory will build the BMW 3 series and 1 series, X1 and X3, and Mini Countryman.