As part of its long-term strategy to become the top carmaker by 2018, VW plans to invest about $4.4 billion in upgrading its vehicles and factories in Brazil. Just ahead of the Sao Paula auto show that kicked off on Monday, CEO Martin Winterkorn said Brazil is a "cornerstone" of the company's strategy.
Part of the reason is that demand is dropping in VW's home market in Germany. The automaker will invest up until 2016 in Brazil, with 126 million euros (about $165 million) earmarked for a component plant in Sao Carlos. It will help boost production at the factory from 3,800 engines currently to 4,800 per day, Automotive News reported.
Otherwise, the money will go towards standardizing production lines and equip them to build cars based on VW's MQB platform, which will underpin the next Golf and many other forthcoming models.
"I see enormous potential in Brazil just from the systemic implementation of parts sharing,'' said VW production chief Michael Macht.
The Brazilian market is seen as a key one not by just VW but others, as sales are due to grow by 8.6 percent in 2012. Asian and U.S.-based automakers are also trying to cash in on it with their own products as well.