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UPDATE 1-BMW to build new car plant in Brazil
* Decision made after Brazil finalised tax rules
* No detail on location or investment volume
* BMW annual sales in Brazil up by average 74 pct since 2009 (Adds background)
MUNICH/FRANKFURT, Oct 18 (Reuters) - German car maker BMW plans to build a new assembly plant in Brazil, tapping into the growing market for luxury cars in Latin America's largest economy,
"We are on track and will now submit an investment plan with the Brazilian government," finance chief Friedrich Eichiner told Reuters by email on Thursday. He did not provide details on the size of the investment, pending ongoing negotiations with the government.
Brazil's trade minister, Fernando Pimentel, earlier said on local radio that BMW would announce plans within days.
The decision ends months of uncertainty that company sources said began when the federal government in Brasilia started to impose additional barriers to trade that risked rendering BMW's investment plans unprofitable.
BMW even threatened in March to pull the plug on the entire endeavour after Brazil introduced a new import levy in December. The company said this effectively added 30 percent to the price of a car. The two sides have since been in talks over the amount of local parts needed to classify the vehicles as built in Brazil.
Production chief Frank-Peter Arndt has previously stated that BMW would start with a pure assembly operation where cars are made from "completely-knocked-down" kits comprised of major component groups. This is a common first step to circumvent import duties and limit financial risks when entering an untested market.
Volumes can be as small as the 2,000 vehicles that BMW started with when it first built an assembly plant in Chennai, India, in March 2007. Its initial investment was less than 20 million euros ($26.18 million).
Its smallest full-scale manufacturing plant is Rosslyn in South Africa, with more than 53,000 cars produced last year.
Arndt has said that the Brazil plan initially entailed choosing a site either in the province of Sao Paolo or Santa Catarina, but Eichiner declined to comment whether this has changed.
BMW, which first announced in March 2011 that it would examine local production, would be the only luxury car maker in Brazil, where living standards are rising swiftly as the country prepares to host the 2014 World Cup and 2016 Olympic Games.
It sold only about 15,200 cars in the country in 2011, but sales have increased at an average annual rate of 74 percent over the past three years.
Daimler, which built its very first plant outside Germany in Argentina more than 60 years ago, was the first luxury car maker to begin building cars in Brazil.
It made the Mercedes-Benz A-Class in its Juiz de Fora plant from 1999, but ceased car production in December 2010 and refitted the site for the manufacture of commercial trucks. ($1 = 0.7638 euro) (Reporting by Irene Preisinger and Christiaan Hetzner; Editing by David Goodman)
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