SAO PAULO (Reuters) - Volkswagen AG truck brand Scania said on Tuesday it will invest 1.4 billion reais ($344.14 million) to modernize its Brazilian factory in Sao Bernardo do Campo, an industrial city near Sao Paulo.
The investment in the historic center of Brazil’s auto industry follows Ford Motor Co’s decision to exit the heavy truck business in South America and shut down its plant in the same city, which could benefit the remaining players in the sector.
During the first four months of 2019, sales of Scania heavy trucks increased 31% compared to the same period a year ago, according to data compiled by local automakers association Anfavea.
The investment comes at a time when the state of Sao Paulo, which long dominated the Brazilian auto industry, has seen auto companies set up factories elsewhere, lured by tax incentives.
Earlier this year, General Motors Co threatened big cuts in its Sao Paulo factories. That prompted state governor Joao Doria to negotiate aggressively, ending in the launch of a new incentive package for auto makers in the state. GM then decided to invest $2.7 billion to take advantage of the tax program.
The new Scania investment will start in 2021 and end in 2024, following its 2016 to 2020 investments, which total 2.6 billion reais, the company said in a joint statement with the Sao Paulo state government.
Scania’s latest financial commitment is aimed at overhauling its assembly line, as well as introducing a new generation of trucks in Latin America.
The Swedish company is among the largest truck firms in Brazil, behind Mercedes-Benz and Volvo.
Reporting by Alberto Alerigi Jr and Marcelo Rochabrun; writing by Gabriela Mello; editing by Bill Berkrot