Volkswagen truck brand to invest $344 million in Brazil after Ford departs

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Volkswagen AG truck brand Scania stated on Tuesday it is going to invest 1.4 billion reais ($344.14 million) to modernize its Brazilian factory located in Sao Bernardo do Campo, an industrial city close to Sao Paulo.

The investment in the historic center of Brazil’s auto industry comes after Ford Motor’s decision to depart the heavy truck business in South America and close its plant in the same city, that could benefit the remaining players in the sector.

During the first four months of 2019, sales of Scania heavy trucks boosted 31% compared to the same period a year earlier, according to data compiled by regional automakers association Anfavea.

The investment comes at a time when the state of Sao Paulo, that long dominated the Brazilian auto industry, has observed auto companies set up factories elsewhere, lured by tax incentives.

Previously this year, General Motors threatened big cuts in its Sao Paulo factories. That prompted state governor Joao Doria to negotiate aggressively, putting the launch of a new incentive package for automakers to an end in the state. GM then decided to spend $2.7 billion to take benefit of the tax program.

The new Scania investment will start in 2021 and finish in 2024, after its 2016 to 2020 investments, which total 2.6 billion reais, the company stated in a joint statement with the Sao Paulo state government.

Scania’s latest financial commitment is aimed at overhauling its assembly line, and also introducing a new generation of trucks in Latin America.

The Swedish company is one of the largest truck firms in Brazil, after Mercedes-Benz and Volvo.

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