October 19, 2012 / 11:29 PM / 8 years ago

BMW to invest $395 million in new Brazil car plant: sources

An old BMW emblem is displayed at antique market in Olszyny near Szczytno, northern Poland July 22, 2012. REUTERS/Kacper Pempel

SAO PAULO (Reuters) - German automaker BMW (BMWG.DE) plans to invest 800 million reais ($395 million) to build a new assembly plant in Brazil, sources with direct knowledge of the project told Reuters on Friday.

BMW’s finance chief Friedrich Eichiner told Reuters on Thursday that the company will submit an investment plan to the Brazilian government. He did not provide details on the size of the investment, pending the ongoing negotiations with the government.

The company decided to go ahead with the project after initially threatening to pull the plug on the entire endeavor following a tax hike on imported cars as well as uncertainty over new rules requiring carmakers use more local content.

With the fresh investment BMW is betting on reaping the benefits of the growing market for luxury cars in Latin America’s largest economy.

Sources with knowledge of the project told Reuters on condition of anonymity that BMW plans to invest 800 million reais to build a plant in Brazil to build five car models, including the Mini.

BMW’s press office declined to comment on the amount of the investment, but said a senior company executive will meet President Dilma Rousseff next week to inform the government of the plans to build the assembly plant.

BMW car sales in Brazil plummeted 29.4 percent in the first nine months of the year from a year ago to 8,768 units as the local economy slowly emerges from a year of stagnant growth.

The Brazilian government has given steep tax incentives for local carmakers to bolster vehicle sales and preserve thousands of factory jobs as policymakers struggle to jump-start the economy.

($1 = 2.0272 Brazilian reais)

Writing by Alonso Soto, editing by Gary Crosse

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