Kia Denies Plan in Place for Building Plant in Brazil

Kia reportedly will build a plant in Brazil to circumvent the high import tariff that halved its sales in the country in 2012.

A press release by Grupo Gandini, the sole importer of Kia vehicles in Brazil, says a production facility will be built, with financing details still being worked out. The release says the plant could be financed entirely by Kia, by Kia in partnership with Grupo Gandini or by Grupo Gandini alone.

Asked by WardsAuto whether the Korean auto maker has discussed the possibility of building a factory in Brazil, Kia spokesman Michael Choo says, “We do not comment on specifics of internal discussions that relate to possible plant projects.”

He adds, “Despite the fact that we believe that Brazil is one of the most important auto markets in the world, Kia does not have any plan to invest in Brazil at the current time.”

Analysts say that by building a production facility in Brazil, Kia might be able to get total relief from the country’s steep import tariff.

Kia holds a 32% share of all vehicles imported into Brazil and had targeted sales of 100,000 units last year. When the 30% tax increase was announced last spring, Grupo Gandini President Jose Luiz Gandini said the measure likely would cut the auto maker’s sales to about 40,000 units.

Choo confirms Kia sales in Brazil dropped from 73,568 units in 2011 to 36,869 in 2012 following the 30% tariff hike. Multipurpose vehicles and SUVs comprised slightly more than half the total, with cars and light-commercial vehicles accounting for the remainder.

Depending on vehicle type and engine size, the tariff can be as high as 55%, analysts note. It is imposed on vehicles that have less than 65% local content.

The tariff increase, seen as temporary when announced, has been extended by the federal government for five years. It was put into effect to protect local manufacturing within Brazil, the world’s fifth-largest automotive market.