Brazil's auto industry should spend $15 billion over the next three years to expand its production capacity to 5 million vehicles a year from 3.5 million, Industry and Trade Minister Miguel Jorge said on Tuesday.
He said the sector was operating close to the limit of its capacity as Brazilians are buying more cars because of accelerating economic growth and falling interest rates.
"The industry has already contracted extra shifts during the weekends and holidays through the end of the year and some companies are contracting additional shifts for next year," the minister told reporters.
"According to our calculations, the car assembly and spare parts industry have $15 billion planned (in investment)," he added.
Brazil's automakers association, known as Anfavea, estimates a record output this year of around 2.96 million cars, commercial vehicles, buses and trucks, up from 2.6 million in 2006, but Jorge said the forecast was conservative, expecting the production to exceed 3 million units.
"The decline in interest rates is helping to heat up the sector... This investment encompasses new plants and capacity expansion, by companies already operating in Brazil," he said, adding that between 80 percent and 90 percent of all production should be absorbed by the domestic market.
According to Anfavea, last year's investment in the sector totaled around $1.6 billion.
The Brazilian car market is dominated by world auto majors like Volkswagen AG (VOWG.DE: Quote, Profile, Research) of Germany, Italy's Fiat (FIA.MI: Quote, Profile, Research), General Motors Corp. (GM.N: Quote, Profile, Research) and Ford Motor Co (F.N: Quote, Profile, Research) of the United States, followed by Japanese and French producers. (Reporting by Rodrigo Gaier, writing by Andrei Khalip)
