Volkswagen confirms new investment cycle for its plants in Brazil

(Corrects name in paragraph 6 to CEO of Volkswagen Passenger Cars Ralf Brandstätter; Herbert Diess is CEO of Volkswagen Group)

SAO PAULO (Reuters) -Volkswagen AG has finalized a commitment to launch a new investment cycle in Brazil, the continent’s top auto producer, its chief executive for South America told Reuters in an interview on Friday.

“We have defined (the investment) and we already stopped production at our factory in Taubate to prepare the new platform,” said Pablo Di Si, Volkswagen’s CEO for South America.

Di Si declined to go into specifics such as the size of the investment, which will replace the current investment cycle that was announced in 2016 with a commitment of 7 billion reais ($1.34 billion).

That cycle was originally scheduled to end last year but the timeline was stretched out when the coronavirus pandemic hit.

So far this year, Volkswagen has become Brazil’s best-selling brand, displacing General Motors Co after many years, in part because GM’s production in Brazil has been more disrupted than Volkswagen’s by a global chips shortage.

Di Si said the details of the investment will be disclosed by global CEO of Volkswagen Passenger Cars Ralf Brandstätter in a trip to Brazil later in the year, although the exact timing depends on how the pandemic evolves.

The factory in Taubate currently produces two compact cars, the Sedan Voyage and the hatchback Gol. Di Si did not specify what will happen to those models, whether they will be upgraded or replaced.

“The investment will reinforce our product portfolio as one of the most important brands in terms of market share,” he said.

Volkswagen, like its peers around the world, has been focusing more and more on developing larger cars, such as SUVs and pickup trucks at the expense of compact cars, both because of the higher profitability of larger vehicles and because consumers are seeking those products more and more as well.

“It’s a trend that will only accelerate,” Di Si said. “It’s not that the entry-level segment will disappear, but one sees how the segment is becoming drastically smaller.”

($1 = 5.2100 reais)

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