STUTTGART -- 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 factory is in Iracemapolis, which is about 170km (105 miles) northwest of Sao Paulo, Brazil's financial hub.
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.
When Mercedes started builting the A-class compact car at its Juiz de Fora plant in 1999 it became the first luxury carmaker to produce vehicles in Brazil. But it ceased car production there in December 2010 and refitted the site to make commercial trucks.
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.