May 7, 2019 / 2:46 PM / 17 days ago

UPDATE 2-Brazil automakers fret about cheap imports from Mexico

(Adds comment from Mexican automakers association)

By Marcelo Rochabrun

SAO PAULO, May 7 (Reuters) - Automakers in Brazil warned on Tuesday of the threat from cheap imported cars from Mexico, as the end of a cap on bilateral trade in the sector presents a new challenge to the dominance of local manufacturing in Latin America's largest auto market.

The Brazil-based arms of global automakers such as General Motors Co, Volkswagen AG and Fiat Chrysler Automobiles NV, whose local plants have long benefited from high tariffs, said through national industry group Anfavea that they struggled to match Mexico's low production costs.

The Brazilian industry's warning echoes the concerns of U.S. President Donald Trump and U.S. labor unions about the threat posed by increasingly efficient Mexican factories staffed with lower-paid workers.

Brazil and Mexico agreed in March to open trade in light vehicles after years of capping trade volumes between the countries. Mexico has been seeking to diversify trading partners since Trump warned of the possible end to the North American Free Trade Agreement (NAFTA) that has defined Mexico's economy.

Anfavea officials said they had presented the Brazilian government with a study comparing production costs and tax burdens facing auto plants in Mexico and Brazil to underscore the challenge.

"We have a very modern industry in Brazil," said Luiz Carlos Moraes, a Mercedes-Benz executive who assumed the presidency of Anfavea in recent weeks. "We can tend to our market. That is what we defend."

Eduardo Solis, the president of the Mexican Auto Industry Association, known as AMIA, said his members were not concerned about the new trade rules with Brazil, and that the two groups had already met to discuss the future.

Brazil is one of the world's most closed major economies and its size has historically helped lured some of the world's largest automakers to set up local production there, serving what had been one of the world's top five car markets before a recent slump.

"We cannot lose our current production volume, or our ability to generate jobs, or our ability to affect the country's GDP," Moraes said, citing statistics that were compiled by PwC consultants at Anfavea's request.

Moraes said the study had concluded that making a car in Mexico was 18 percent cheaper than in Brazil and that importing a Mexican car to Brazil was still cheaper than a locally made one.

He made the comments at a news conference presenting monthly statistics, which showed automobile production in Brazil rose 11.1 percent in April from March, while sales rose 10.9 percent.

Automakers in Brazil produced around 267,500 new cars and trucks last month, while sales totaled about 231,900 vehicles. Compared with a year ago, auto output rose 0.5 percent and sales grew by 6.7 percent. (Reporting by Marcelo Rochabrun; Additional reporting by Sharay Angulo in Mexico City Editing by Brad Haynes, Bill Trott and Jonathan Oatis)

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