PUEBLA CITY, Mexico (Reuters) - Volkswagen AG’s VOWG_p.DE Audi premium brand will not build a vehicle assembly plant in Brazil until the laws governing what exactly is required to ensure a car is considered locally built are clarified, the unit’s chief executive said on Saturday.
“We are studying now some details, but even the government is not really clear when it comes to localization, what type of parts do they mean?” Rupert Stadler told reporters in Puebla City, Mexico after Audi celebrated the laying of the foundation stone in a nearby town for a $1.3 billion plant that will open in mid-2016.
“The whole framework of laws and regulations is not transparent,” he added. “So you cannot now say, ‘I‘m going to Brazil’ because you don’t know the details.”
Brazil is the world’s fourth largest automotive market and many automakers are opening plants there to avoid tariffs on imported vehicles. Audi officials have said in the past the company might add a plant in Brazil.
VW officials said in March that they saw the Brazil industry sales slowing this year and the pace of investments in local factories would hinge on demand. Audi rival BMW has said it plans to open a factory in Brazil in late 2014.
While Audi has the necessary government approvals to proceed if it wanted, Stadler said he won’t invest without more clarity.
“It has to be clear,” he said. “What are the conditions? What is the requirement for localization? This is very complicated, so it needs some time.”
Stadler also said the opening of the Mexican assembly plant in three years does not close the door on the brand some day building vehicles in the United States.
“That’s absolutely open in the future because it always depends what car do you discuss, where is the main market and is the framework the right one,” he said.
VW builds VW-branded cars at its plant in Chattanooga, Tennessee, but does not assemble Audi vehicles in the United States.
Reporting by Ben Klayman in Puebla City, Mexico; Editing by Eric Walsh