Volkswagen opens truck factory in Argentina

Volkswagen is inaugurating its first truck and bus factory in Argentina this week. The facility will operate on the same grounds as a Volkswagen group factory in the province of Córdoba, which already produces car transmissions for export. According to Roberto Cortes, CEO of Volkswagen Caminhões e Ônibus, local production will allow the company to expand sales of commercial vehicles, as it will be free from import licenses that have become common in the neighboring country.

Announced at the end of 2022, a year before the liberal Javier Milei was elected president of Argentina, the new factory was built as part of the latest investment plan—totaling R$2 billion between 2021 and 2025. The company has not disclosed how much was invested in this operation, which will start modestly with only 100 employees assembling trucks and buses using parts imported from Brazil.

In the future, however, the plan is to establish an operation in Córdoba very similar to Volkswagen’s facility in Resende, in the state of Rio de Janeiro. Inaugurated in November 1996, the Resende plant has become a reference for the modular consortium production method, whereby component suppliers operate within the assembly line itself.

According to Mr. Cortes, the ongoing crisis in Argentina is not a reason to avoid investing in the country. “We know that in emerging markets there are fluctuations; governments come and go. But we look at the cycle, and the region is a good place to do business,” he said.

The executive highlighted the country’s potential in sectors such as agribusiness, and noted that Mr. Milei’s liberal measures have been well received “theoretically and technically.” “Throughout my career in the automotive industry, I’ve faced 19 crises [in Brazil]. We learn to deal with structural problems and try to manage the cyclical ones,” Mr. Cortes said.

Volkswagen’s move with Caminhões e Ônibus (Truck and Bus) aligns with the company’s plan to internationalize an operation that made Brazil its headquarters. It all began in November 1996 with the inauguration of the Resende factory.

The production method implemented at the facility brought key suppliers to assemble component sets within the vehicle assembly line itself. The so-called modular consortium became a benchmark, making the Brazilian operation the global headquarters of Volkswagen Caminhões e Ônibus, with Mr. Cortes at the helm. Today, Volkswagen Caminhões e Ônibus is part of TRATON, which is under the Volkswagen Group and includes Scania, MAN, Navistar, and Volkswagen Truck & Bus.

According to Mr. Cortes, the internationalization plan envisions the company having more factories in countries with market profiles similar to Brazil’s. The company already has a factory in Mexico, one in South Africa, and a small assembly line in the Philippines. The goal is to establish new factories in Africa, the Middle East, and even Asia.

International operations currently represent around 15% of the business. The aim is to reach 25%. “Argentina has always been the main market outside Brazil. We’ve been here for 25 years. All that was missing was having a factory,” Mr. Cortes said.

On Monday, Mr. Cortes spent the day with members of the Argentine government’s economic team, including Economy Minister Luis Caputo. According to him, no requests were made. The meeting served only to formalize the start of production, which will be marked by a ceremony on Tuesday attended by authorities from the Córdoba government.

In Argentina, five models of trucks and buses will be produced. The initial projection is to produce 800 units this year, but the capacity will allow for up to 2,700 units. The Resende factory will continue to export complete vehicles to complement the product offerings in the neighboring market.

While overseeing the company’s internationalization plans, Mr. Cortes is celebrating the beginning of the recovery of the Brazilian commercial vehicle market.

Truck production grew by 34% from January to April, a sign, the executive said, that consumers have begun to accept the price increases brought on by the transition to new emissions regulations.

With the requirement that all trucks and buses produced in the country since January 2023 comply with the Euro 6 phase, vehicles received more emission control equipment, making them more expensive. This led to a stagnation in sales in 2023.

But now, the executive said, the trend of falling interest rates is helping the sector. Mr. Cortes aligns with industry representatives’ forecasts that production in 2024 will grow by around 14%. “It’s a good number,” he said.

Translation: Carlos Dias

Source: Valor International

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