UPDATE 1-Daimler to spend $230 million on new car plant in Brazil

Tue Oct 1, 2013 11:35am EDT

* To assemble Mercedes C-Class, GLA models near Sao Paulo

* To build up to 20,000 cars annually, starting in 2016

* To create 1,000 jobs locally, another 3,000 at suppliers (Adds further details, background)

FRANKFURT, Oct 1 (Reuters) - Daimler plans to build a new manufacturing plant in Brazil, it said on Tuesday, becoming the third German premium carmaker to announce such plans within the past year.

The Stuttgart-based company is to spend around 170 million euros ($230 million) setting up a plant in Iracemapolis near Sao Paulo, where it aims to manufacture up to 20,000 Mercedes-Benz C-Class and GLA cars annually.

"We will be localising two highly attractive products with top Mercedes quality, for which we see great potential in the Brazilian premium segment," said Andreas Renschler, head of production and procurement at Mercedes-Benz Cars.

The first models are expected to roll off the assembly line as early as 2016, according to the company.

With 3.8 million vehicles sold last year, Brazil is the fourth largest car market in the world after China, the United States and Japan. Its premium segment is fledgling in size, however, and represents only around 1 percent of sales, in part due to the heavy tariffs levied on imports to the country.

The decision by Mercedes was largely expected after Chief Executive Dieter Zetsche said last month that he was in favour of building a new assembly plant in Brazil since it was difficult to grow there relying just on imports.

Its decision makes Daimler the third of the three dominant German premium carmakers to announce such plans within the past year, after the Brazilian government created new policies aimed at boosting local production and employment.

Daimler, originally the first company to build premium brand cars in Brazil, with its A-Class plant at Juiz de Fora, which ran from 1999 until 2010, estimated that the new factory should create 1,000 new jobs directly and a further 3,000 at suppliers.

Last October BMW said it will invest over 200 million euros in a new plant in Brazil that opens next year, while Volkswagen's Audi said two weeks ago it would invest around 150 million euros in a plant to build Q3 and A3 vehicles from 2015. ($1=0.7387 euros) (Reporting by Christiaan Hetzner; Editing by Greg Mahlich)