Hyundai Motor to build $600 mln factory in Brazil

SEOUL, Sept 19 (Reuters) - Hyundai Motor Co (005380.KS), South Korea's top auto maker, said on Friday it would build a $600 million car factory in Brazil to expand its base in the booming country.

Hyundai, the world's number five car maker along with its affiliate Kia Motors Corp (000270.KS), said the plant would have an annual capacity of 100,000 units.

Hyundai aims to start production in 2011 at the factory, which would be built in Piracicaba City in Sao Paulo State, about 160 km (100 miles) northwest of Sao Paulo city.

"Securing sales in emerging markets such as Brazil, as demand in traditional markets such as the U.S. and western Europe stabilises, is key to Hyundai Motor's sustainable growth and success," it said in a statement.

Car sales in Brazil have risen 26.4 percent during the first eight months of this year and are expected to finish 2008 with growth of 24.2 percent, according to the National Automakers' Association Anfavea.

Hyundai said its sales in Brazil almost tripled to 36,006 vehicles from a year ago.

It plans initially to produce a small flex-fuel car, which can run on both gasoline and ethanol, starting from the first half of 2011, to meet high local demand.

The company also aims to expand the plant later to increase the line-up and export to other countries, depending on demand in Latin America.

With sales lagging in developed markets like the United States, Europe and Japan, and even once-promising regions like China and India not living up to expectations, car makers are pouring money into Brazil.

Excluding Hyundai's investment, the auto industry in Brazil is set to attract a whopping $23 billion in investments in the next four years, lifting overall capacity by 2.5 million vehicles to 6 million a year, according to the National Automakers' Association.

General Motors Corp (GM.N) expects to invest about $3 billion over the next five years as Brazil has become an important engineering hub for the U.S. automaker as well as its third-largest market.

Ford Motor Co (F.N), which not long ago considered pulling out of Brazil altogether, plans to spend more than $1.6 billion in the next four years on product development and to double capacity at its engine factory.

Toyota Motor Corp (7203.T) plans to build a $700 million plant in the state of Sao Paulo to boost its presence in Brazil, where its market share is just 2 percent. Nissan Motor Co (7201.T) said last month that it would start building cars in the country for the first time.

For Hyundai, overseas operations are a key for future growth as they help the company reduce the impact of conflict with its unionised workers at home and the won's KRW= sharp fluctuations, analysts said.

Hyundai, which has factories in the United States, China, India and Turkey, is also building plants in Russia and the Czech Republic.

In Brazil, CAOA, a local company, is now operating an assembly plant to produce Hyundai's small truck. Hyundai does not own a stake in the assembly plant.

On Thursday, shares in Hyundai ended down 1.9 percent at 67,000 won compared with a 2.3 percent drop in the KOSPI index .KS11. (Reporting by Cheon Jong-woo; Editing by Paul Bolding)