China's Great Wall Motor is expanding its operations across the developing world. Image: Global Times

In late January, Great Wall Motor (GWM) – the 5th largest Chinese automaker and largest Chinese maker of SUVs and pickups – took possession of an auto factory previously owned by Daimler in Iracemapolis, Sao Paulo, Brazil. GWM plans to transform the factory into the core of its business in South America.

Daimler sold the factory, which had produced Mercedes-Benz automobiles since 2016, to GWM last August. Production had already been shut down after sales collapsed due to Covid-19. (Daimler changed its name to Mercedes-Benz Group on February 1.)

Looking past the pandemic, GWM aims to adapt the factory to its own needs and restart production in the second half of 2023 with an initial capacity of 100,000 vehicles per year. According to its press release, over the next 10 years GWM plans to invest more than 11.5 billion renminbi (US$1.8 billion) in its Brazilian operations:

to deepen the layout of the local industrial chain, build local scientific and technological enterprises, focus on electrification and intelligence, and strive to become a leading brand of new energy vehicles in the Brazilian market….

GWM plans to build a stronger presence in the localized industry chain and invest in local key auto parts by stages, aiming to reach region-based cooperation with local suppliers, with a localization rate of over 60%, and invest in the local charging network to enable coverage across core cities in Brazil, by 2025.

GWM plans to launch 10 new models in Brazil, including four battery-powered and six hybrid electric vehicles. All of them will be equipped with IoV (internet of vehicles) and L2 (partial driving automation) driver assistance systems.

The vehicles produced at Iracemapolis will be supplied first to customers in Brazil and later to other markets in South America. GWM has been exporting cars from China to Latin America for more than a decade.

A Haval SUV from Great Wall Motors is showcased during the 2021 China Joy in Shanghai, on July 31, 2021. Photo: Facebook / China Daily

Brazil, which has a population of about 215 million, is the seventh-largest auto market in the world and the largest auto market in Latin America. The Brazilian auto manufacturers association ANFAVEA (Associação Nacional dos Fabricantes de Veículos Automotores) forecasts that auto sales in the country should rise by 8.5% this year to 2.3 million units.

GWM sums up its approach to Brazil with this comment:

In the whole process of globalization, Brazil will serve as a strategic market and take this as the center to open the curtain of the whole Latin American market, and bring Chinese intelligent manufacturing to the majority of Latin American users with products of a variety of technical routes such as pure electricity, hybrid and hydrogen energy.

Hydrogen fuel cell vehicles, too. Toyota and Hyundai, watch out!

Brazil will be GWM’s third overseas manufacturing base after Russia and Thailand. It began production at its Tula plant south of Moscow in 2018. In 2020, it bought General Motors’ (GM’s) assembly plant in Thailand, where it plans to make electric vehicles for sale in Southeast Asia. GM has also given up manufacturing in Australia, Western Europe and Russia.

According to news reports, Australian Prime Minister Scott Morrison had this to say about the shutdown of Holden, formerly known as General Motors-Holden:

“They let the brand just wither away on their watch.… Taxpayers were giving a multinational extra money, year after year, and at the end of the day they walked away. And I think that says everything you need to know about the success of those sorts of policies.”

GWM has also agreed to buy GM’s Talegaon export-oriented factory in Pune, India. However, as a result of the violent border dispute with China, the Indian government has not yet approved GWM’s investment. GWM is still interested, but as a practical matter has shifted some of the allocated funds to Brazil.

GM sold its Halol factory in Gujarat to SAIC Motor, China’s largest automaker, and stopped selling cars in India in 2017.

GWM also has knockdown kit assembly plants in Ecuador, Malaysia, Tunisia and Bulgaria, and some 500 dealerships in 60 countries and regions worldwide. It sold 1.28 million vehicles in 2021 and targets 4.0 million in 2025. In comparison, industry leader Toyota sold 9.56 million vehicles last year.

Mercedes-Benz maintains two other production sites in Brazil that make commercial vehicles and components. Ford Motor, on the other hand, shut down all of its Brazilian production in 2021. Ford will henceforth supply Brazil from its factories in Argentina and elsewhere. But Ford is upgrading its factories in Thailand.

An employee works at an assembly line at the new Ford Thailand manufacturing plant located in Rayong province, East of Bangkok May 3, 2012. Ford Motor Corp is eyeing Indonesia as a production centre to help meet strong demand for cars in Southeast Asia but supply problems mean Thailand will remain its regional hub for the foreseeable future, company executives said. REUTERS/Chaiwat Subprasom (THAILAND - Tags: TRANSPORT BUSINESS) - RTR31JKS
A worker at Ford Thailand’s plant in Rayong province, east of Bangkok. Photo: Facebook

While it is a mixed picture, viewed broadly Chinese automakers are advancing in developing country markets while Western automakers are retreating.

It has been said that “Brazil is the country of the future and always will be.” GWM is investing in the future of Brazil; Mercedes-Benz and Ford are not.

Workers at GM, the oldest automaker in Brazil, have recently been on strike. In terms of sales, GM ranks third in the Brazilian market after Fiat and Volkswagen. It is followed by Ford, Renault, Citroen, Honda, Toyota, Hyundai and Nissan, in that order.

GWM is making a major investment in a very crowded market, but arguably has an advantage in terms of price and commitment.

In any case, GWM’s investment is offsetting the withdrawal of Mercedes-Benz and Ford, helping maintain auto industry employment and improving China’s standing in Brazil.

Finally, note that BYD – the Chinese maker of batteries and electric vehicles backed by Warren Buffet – entered the Brazilian market in 2013. First importing electric buses and taxis, it started building a factory in Campinas, Sao Paulo the following year. Electric delivery vans and forklifts were later added to the product line.

Sao Paulo state is now the largest market for electric buses in South America with an estimated market potential of 7,000 vehicles, and BYD is selling electric buses and other products in other parts of Brazil as well. In 2019, it won a contract to build an urban monorail in the city of Salvador in the northeast of the country.

BYD has also sold hundreds of electric buses to Colombia and Chile.

BYD opened a photovoltaic module factory in Brazil in 2017 and a battery factory in 2020. This year, it plans to enter the Brazilian market for electric passenger cars with a four-wheel-drive compact SUV.

Western politicians can talk all they want about countering China in Latin America and around the developing world. In the case of the auto industry, the trend is not their friend.

Scott Foster is an analyst with LightStream Research, Tokyo. Follow him on Twitter: @ScottFo83517667