Volkswagen is to invest 520 million reais ($A252 million) to develop a new model of its highly popular Golf compact, which will be manufactured in the southern Brazil.
Volkswagen do Brasil President Thomas Schmall made the announcement on Thursday after meeting with Brazil's head of state, Dilma Rousseff, to present the company's plans.
The new Golf model will be manufactured at the multinational's plant in Parana, and sold in Brazil from in 2016, Schmall said.
The announcement comes after Mercedes Benz and Audi unveiled big bets on Brazil's promising auto market.
Mercedes said last week it would invest some $US230 million ($A246 million) to build a second plant in the southeastern state of Sao Paulo.
The luxury automaker's factory will have a production capacity of 20,000 vehicles per year and begin operating in 2016.
Audi also has announced plans for a big push into Brazil's luxury vehicle market, saying last month it would invest $US500 million over the next two years to build a new assembly plant in Brazil.
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