Sorocaba - Japanese auto giant Toyota inaugurated a $600m plant in the southeast Brazilian state of Sao Paulo on Thursday, its third in the country, with an initial aim of producing 70 000 cars a year.
The facility, located 91 kilometers west of Sao Paulo in Sorocaba, will begin producing Etios compact cars in September, with engines imported from Japan.
Toyota, which recently returned to the top of the global carmakers' league, is seeking to cash in on the rising prosperity of Brazil's expanding middle class, which today numbers around 95 million people, half the population.
Toyota president Akio Toyoda, present at the inauguration, described the four-door Etios, which will be produced in hatchback and sedan versions, as "a car made by Brazilians for Brazilians".
The car is a modified version of the model already being sold in India and South Africa, which, like Brazil, are part of the Brics bloc of emerging powers that is completed by China and Russia.
Brazilian Industry and Foreign Trade Minister Fernando Pimentel, Sao Paulo governor Geraldo Alckmin and Japanese ambassador to Brazil Akira Miwa attended the ceremony, as did Brazilian soccer great Zico, a former coach of Japan.
Pimentel said the Sorocaba plant, billed as environmentally friendly and employing 1 500 workers, amounted to a vote of confidence from Toyota "in the strength of the Brazilian economy and the Brazilian auto market".
Brazil, now the world's sixth-largest economy, is the world's fourth-largest auto market after the United States, China and Japan.
Shunichi Nakanishi, president of Toyota Mercosur, said the company planned to double its sales in Brazil to around 200 000 vehicles in the next two years and become one of market leaders in the next decade.
The Japanese carmaker has been present in Brazil since 1958 but had less than 3% of the domestic auto market last year, lagging behind leading players Fiat, Volkswagen and General Motors.
Toyota has two other plants in Sao Paulo state: in Sao Bernardo do Campo, where it is headquartered, and in Indaituba.
On Wednesday, Toyoda announced after talks with President Dilma Rousseff in Brasilia that the automaker also planned to invest $495m to build an engine plant in Porto Feliz, 20 miles from Sorocaba.
That facility will be ready in 2015, employ 600 people and churn out around 200 000 engines for Etios and Corolla vehicles.
The Porto Feliz engine plant will eventually enable Toyota to produce the two models with 85% local parts, thus avoiding a 30% import tax.
Last April, Brazilian authorities introduced a new directive known as Inovar Auto aimed at spurring innovation by forcing automakers to invest in vehicle and component research and product development.
The move triggered a flood of inward investment in the domestic auto market by companies hoping to avoid the import tax.
Toyota said the new investments are aimed at boosting local production "now that the Brazilian auto market is showing signs of consistent growth."
Sales in Brazil fell 1.2% in the first half of 2012, compared with the same period last year, according to the National Association of Motor Vehicle Manufacturers.
But government stimulus measures produced signs of a rebound in June, when sales rose 22.9% to 353 200 units, from 287 500 in May, according to the auto trade organisation.