Volkswagen will stop making cars that can run only on gasoline in Brazil
Automotive News - March 23, 2006
SAO PAULO, Brazil -- Volkswagen will stop making cars that can run only on gasoline for the Brazilian market this year and focus exclusively on flex-fuel autos that run on ethanol, gasoline or any mix of the two, a company executive said on Thursday.
The shift in production is the latest example of how automakers around the world are scrambling to roll out fuel-efficient vehicles to woo consumers worried about surging gasoline prices.
"By the end of the year, 100 percent of our local production will be with flex-fuel technology," Paulo Kakinoff, the company's sales and marketing director, said at a ceremony in Sao Paulo to unveil its latest flex-fuel compact model, a 1.6-liter Golf.
Volkswagen was the first in Brazil to launch a flex-fuel engine in March 2003, when it introduced the TotalFlex Gol subcompact model. Other major automakers such as Ford Motor Co. and General Motors soon followed suit, and today Brazil's new-car market is dominated by these hybrid vehicles.
Flex-fuel vehicles accounted for nearly 77 percent of all new-car sales in Brazil in February, up from about 30 percent just over a year ago, according to industry data.
In 2005, Volkswagen's Brazilian unit made about 300,000 vehicles equipped with flex-fuel engines, close to 75 percent of its total production for the domestic market. This year it expects to produce about 450,000 of these alternative cars.
With the new Golf, Volkswagen boasts a line-up of 10 different models with flex-fuel engines. The company holds the biggest share of Brazil's flex-fuel market, with 35.5 percent of total sales, followed by Italian automaker Fiat, with 30.5 percent.
Volkswagen is betting on flex-fuel cars at a time when ethanol prices are rising in Brazil, irking motorists who had bought the cars primarily to save money on fuel. In many parts of the country, ethanol prices have risen so much that gasoline is more economical because it gets better mileage than ethanol.
Part of the price increase is seasonal, since Brazil is currently between sugar cane harvests -- the raw material used to make ethanol. A recent surge in world sugar prices has also helped drive up the cost of ethanol, raising the likelihood that cane farmers will prefer to make sugar instead of fuel.
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