Volkswagen (VLKAY) Aims to Expand in Brazil with First SUV

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Per Reuters, Volkswagen AGVLKAY announced the plan to manufacture its first compact sport utility vehicle (SUV), T-Cross, in Brazil. With this recent development, the company hopes to recover the market shares in the Latin American region.

Anticipated to hit the market by the first-half of 2019, Volkswagen announced the plans to invest $595 million (R$ 2 billion) for the production of T-Cross at its Sao Jose dos Pinhais facility, situated in southern Brazil. Further, it added that this investment is a part of the R$7 billion planned investment through 2020. The investment is intended to facilitate Volkswagen in reviving its product lineup in Brazil.

Over the last 10 years, Volkswagen's shares in the Brazilian auto market contracted amid recession and opening of local factories by new entrants. However, recent low interest rates and last year's export-driven rebound in the sector revived hopes for a few auto manufacturers.

Volkswagen AG Price and Consensus

Volkswagen AG Price and Consensus | Volkswagen AG Quote

On the contrary, another major automaker Honda Motor Co., Ltd.HMC recently reported that it will shift vehicle production from the Sumare facility to the existing Itirapina plant, where the Sumare hub will be used for engine production.

Earlier in this decade, Honda planned to double its production capacity in Brazil through the new Itirapina plant to cater the growing demand. However, the economic crisis led to change of plans for the company. Per management, while the Brazilian market revived after the recession, the growth outlook was below the previously forecasted volumes.

Price Performance

In the last three months, shares of Volkswagen modestly underperformed the industry it belongs to. During the period, its stock fell 6% in comparison with the industry's decline of 5.2%.

Zacks Rank & Key Picks

Volkswagen carries a Zacks Rank #4 (Sell). A few better-ranked stocks in the auto space are Tenneco Inc. TEN and Spartan Motors, Inc. SPAR , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Tenneco has expected long-term growth rate of 13.5%. Over a month, shares of the company rose 3%.

Spartan Motors has expected long-term growth rate of 15%. In the last six months, shares of the company gained 36.8%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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