BERLIN/SAN PAULO -- Volkswagen AG will boost production and add models in Brazil to challenge Fiat S.p.A. for the leading position in the country's rapidly growing auto market.
"Competition in Brazil is intense and we expect it will become even more intense in the future," Thomas Schmall, head of VW's Brazilian operations, said. "We want to further expand our position."
VW is trailing Fiat in a three-way race with General Motors Co. for the country's top spot. VW is expanding three of five plants in Latin America's largest economy to increase sales 40 percent to 1 million vehicles in the next four years, Schmall said.
VW, Europe's largest automaker, is investing 2.3 billion euros ($3.3 billion) in Brazil through 2014 as a growing middle class, strong currency and job creation ahead of the 2014 World Cup and 2016 Olympics fuel demand.
Auto sales in the country, VW's third-biggest market after China and Germany, will advance 40 percent by the end of 2016 to 3.64 million vehicles annually, according to industry researcher IHS Automotive. Fiat leads this year with a 22.3 percent share of the car and light truck market through mid-March, according to data from Brazilian dealers association Fenabrave.
VW is second with 21.8 percent and GM is third with 18.2 percent. VW and Fiat have been trading the top spot back-and- forth, while facing increasing pressure from rivals pouring in to capitalize on the market's potential.
Brazil is Fiat's profit driver
"Brazil has never experienced a moment such as the present one, having 45 brands selling their cars here," said Paulo Sergio Rosa, an automotive consultant from Consultoria Columbia in Sao Paulo. "The math now suggests a subtraction for everyone. VW is making a huge effort to try and get the lead back." Fiat is spending 10 billion reais ($6 billion) through 2014 to cement itself as the country's biggest automaker and boost deliveries to more than 1 million vehicles.
Brazil is especially important for Fiat because it does not have a strong presence in the other growth markets of China, Russia and India. "Our profits don't come from Italy, but from Brazil," CEO Sergio Marchionne said Feb. 15. Fiat deliveries in the country increased 1.6 percent last year to 761,400 vehicles, generating revenue of 9.25 billion euros, or 25 percent of total sales, according to its annual report.
The VW group, whose revenue in Latin America increased 40 percent last year to 13.5 billion euros, sold 711,500 vehicles, including the Audi luxury brand and commercial-vehicles division, in Brazil in 2010.