Government Policy Attracts Regional Investment
Chinese Zhejiang Geely Holding Group ha s announced that vehicles it produces in Uruguay are to be sold in Brazil and Argentina. BMI believes a number of Chinese auto manufacturers are interested in the Latin American region in the hope of profiting from what are broadly high-growth markets. As several countries in the region have implemented high import taxes to encourage domestic production, we expect Chinese companies to invest in local manufacturing facilities. We expect this trend will continue as Latin American markets keep developing, and more Chinese firms look to expand their global presence.
Geely has a complete knocked - down kit (CKD) assembly plant in Uruguay. As a member of the Mercosur trading bloc, exports from Uruguay are not subject to the prohibitive import restrictions in Brazil and Argentina.
The Brazilian government has implemented a number of policies to encourage investment from international auto manufacturers. Despite an initial decline in production, the policy has led to substantial investments across the supply chain from a number of auto manufacturers, including a number of Chinese companies ( see our online service, December 12 2012, 'Investment Attests To Policy Bearing Fruit' ). D espite the surge in the country's passenger car market, a number of Chinese firms faced declining sales as the higher import taxes impacted prices and made domestically produced cars more competitive .
Further, in October 2012, Chinese auto manufacturer Lifan Group announced that it was investing US$150mn in a production facility in Uruguay to target the Brazilian and Argentine markets ( see 'Lifan Joins The Party', October 17 2012 ). The domestic market in Uruguay is relatively small, but we believe it will attract some investments as a member of the Mercosur trading bloc.