From May 2024, products from the Chinese car company Great Wall Motor (GWM) will roll off the assembly line at the Iracemapolis car plant in the greater Sao Paulo area. The Chinese had bought the plant from Mercedes-Benz. The Germans only built the factory in 2016. The C-Class and the GLA compact model were produced there. But sales fell short of expectations, so in August 2021 the Swabians sold the plant to the Chinese, who want to use it to strengthen their presence in Latin America. In July, fast-growing Chinese electric car maker BYD announced a $290 million investment in a lithium cathode factory in northern Chile. BYD is already producing in a plant in Bahia on the Brazilian east coast.
More than ten billion euros for Brazil
Two reports from a whole range of recent announcements of billions and millions of investments in the auto industry in Latin America. The structural change away from combustion cars to electromobility, as well as the ever-growing Chinese auto industry, which has identified Latin America as an expansion and production market, are causing investment competition in the region. The portal Automotivebusiness recently commented on the Brazilian market alone: ”Car manufacturers want to invest more than 50 billion real (around 10 billion euros) in Brazil by 2025.”
Vehicle production for the Stellantis car company in Betim (Brazil) Photo: Pedro Vilela/Getty Images
Classic production sites are the winners
The main winners of this development are the classic production locations such as Mexico and Brazil. They have decades of experience in vehicle production and are also close to the so-called “Lithium Triangle” of Argentina, Bolivia and Chile. Around two-thirds of the global lithium deposits, which are of central importance for the battery production of electric cars, are assumed to be here. From there, too, there are plans for big investments: For example, Ford announced a $660 million investment to manufacture the new generation of the Ranger model in Argentina.
Brazil hopes for investments
When asked by DW, Guilherme Mello, who is responsible for developing economic policy at the Brazilian Ministry of Finance, announced that the Brazilian government was planning to draw up guidelines for investments in research and development for the manufacture of sustainable vehicles in the second half of this year. Mello is convinced that the prospect of economic recovery, a sustainable tax system, ongoing tax reform and the proposal for an ecological transformation plan “should attract new investments in medium- and high-technology industries”.
In January 2023, Federal Chancellor Olaf Scholz inspects the production of a VW Amarok at the Volkswagen vehicle plant in Pacheco (Argentina) Image: Kay Nietfeld/dpa/picture alliance
Mexico hopes for a job boom
In Mexico, Latin America’s other classic auto country, the industry is confident that the development will create new jobs in Mexico’s auto parts and automotive industries. In order to prevent a shortage of skilled workers, the National Auto Parts Industry Association (INA) says it is working on “updating and creating courses and training for people already working in the industry, as well as educational plans for young people”.
Germany also relies on Latin America
“The German automotive industry can benefit from the advantageous location conditions in Latin America and is therefore present in Mexico, Brazil and Argentina,” said a spokeswoman for the Association of the German Automotive Industry (VDA) when asked by DW. Mexico in particular, with its relevant domestic market on the one hand and its geographical proximity to the United States on the other hand, represents a suitable production location for numerous, including German, automobile manufacturers and suppliers: With the exception of the record year 2019, according to the information, German manufacturers have never had so many vehicles in Mexico manufactured as last year 2022 (634,300 units). “The production volume of German vehicle manufacturers in Mexico has more than doubled over the past 20 years,” said the VDA spokeswoman.
This is where the “white gold” is mined: The Atacama Desert in ChileImage: MARTIN BERNETTI/AFP
Demands on German and European politics
With a view to the hard-fought access to raw materials in Latin America, the VDA goes on to explain: “Access to raw materials is of the utmost importance for the market ramp-up of electromobility and thus for achieving the EU climate goals.” However, the lithium reserves in South America have hardly been tapped. “That has to change, the reserves have to be recovered in compliance with the highest sustainability standards. The EU and Germany have to intensify their cooperation with the countries of South America in the area of raw material extraction and, where they do not yet exist, conclude raw material partnerships.”