Premium car maker Jaguar Land Rover today announced a £240m investment in Brazil to set up a new manufacturing plant there. The new facility will be based in the city of Itatiaia in Rio de Janeiro state.
The latter has been negotiating with JLR since the start of this year, with a package of tax breaks and fiscal incentives likely to be on offer to help lure the JLR investment.
Production there could start as early as 2016. Initially the plant will employ 400 people, rising to 800 by the end of the decade. The plant will be able to produce up to 24,000 cars a year.
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The move comes as no surprise. JLR said recently that it was planning to expand manufacturing and increase production in key markets outside Britain, notably in China and Brazil.
And as JLR's Chief Executive, Ralf Speth has said on a number of occasions, JLR needs to go "where the markets are". He stressed last week that "Brazil and the surrounding regions are very important. Customers there have an increasing appetite for highly capable premium products.
Indeed, the JLR move comes after premium rivals BMW, Mercedes-Benz and Audi all announced that they will be setting up plants in Brazil. Audi had stopped production there in 2006 but has just announced that it will start production again.
In part that is because Brazil is now the fourth biggest market in the world (sales there are set to top 4m units this year, with 70% of the market accounted for by Fiat, VW, GM and Ford at present).
Brazil is still a small market for the premium players. BMW and Mercedes are set to sell around 15,000 cars there this year, with JLR not that far behind. But the key point is that there is a burgeoning middle class increasingly keen to show its wealth by driving premium branded cars, with significant premium sector growth forecast over the next few years.
The moves also reflect the fact that the Brazilian government last year upped tariffs on imported cars by 30% but (to encourage inward investment in the industry) exempted automotive firms that had plants in Brazil.
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Over the course of this year, the finer details of this policy to attract foreign investors have been hammered out, leading to the recent wave of investment announcements, with JLR now set to join the club.
As well a growing premium market, and a tax regime designed to encourage inward investment, other factors at play which have encouraged JLR to go for production in Brazil including the need to avoid exchange rate risks, reduce transport costs, and to source components locally.
The latter will of course raise some concerns with local JLR suppliers here in the West Midlands, who may worry about JLR shifting production out of the 海角视频. That's not - for now - a real threat and in fact I expect JLR to grow production rapidly over the next decade in China, India, Brazil and also the 海角视频.
The move also opens up opportunities for the larger suppliers to JLR to themselves globalise and to produce overseas to supply JLR. Indeed one reason why a Chinese firm recently acquired CovPress was not just to enter the European market but also to supply JLR in China.
The challenge for the supply chain locally will actually be to keep up with JLR's rapid pace of expansion, especially given constraints on accessing skills and finance locally. Making sure we help such firms will determine whether we really grasp the opportunity of a generation to rebuild supply chains and rebalance our region's economy.
* Professor David Bailey works at the