MercoPress. South Atlantic News Agency

Mercedes plans to build a compact cars factory in Brazil

CEO Dieter Zetsche confirmed the announcement in the German media

German carmaker Daimler plans to build a new Mercedes factory in Brazil to benefit from growing demand for compact cars in the country, its chief executive told a German newspaper.

Stuttgarter Zeitung cited the luxury carmaker's CEO Dieter Zetsche as saying Daimler would choose this year between two or three locations it had short-listed for the plant in Brazil.

He told the daily's Saturday edition it would not have been profitable to export compact cars to Brazil.

“With the new compact class we have cars on offer that are attractive and can be produced at low costs, making them a good fit for this market,” Zetsche said.

“It was simply a question of either producing in Brazil or not to be present there at all in this segment. Our decision is: We want to take part.”

Zetsche did not specify the model to be built there. Daimler defines its compact class as comprising the A-class and B-class as well as GLA and CLA models.

Daimler said last month it was considering such a move but had made no decision yet.

Luxury carmakers are flocking to Brazil in an attempt to exploit growing demand. Brazil's government complicated their plans, however, with an effort to protect local jobs by increasing a tax on foreign-made cars last year.

Brazil's auto industry lobby group last week raised its 2013 production outlook helped by exports, mainly to the United States.