Toyota plans to invest BRL11bn (US$2.2bn) in its Brazilian operations by 2030 to expand capacity and to switch production to flex fuel hybrid vehicles, according to local reports.

The automaker is the latest to step up investment in South America’s largest economy in response to new incentives announced by the Brazilian government in December aimed at reducing the industry’s carbon emissions.

The fund would expand production capacity of models driven by flex fuel hybrid powertrains, with internal combustion engines (ICE) which run on ethanol or petrol supplemented by electric motors.

The company launched its first flex fuel model in 2020, a Corolla.

Toyota said BRL5bn would be invested by 2026 to build a new plant in Sorocaba in Sao Paolo state to produce a previously announced new compact hybrid flex fuel model from 2025 and also a nearby production facility for hybrid vehicle batteries by 2026.

The automaker said its existing facility in Sorocaba was operating at full capacity.

Existing vehicle production in Indaiatuba, also in Sao Paulo, would be transferred to the new Sorocaba plant by the end of 2026 to consolidate operations in one area.

Toyota do Brasil president, Evandro Maggio, said: “We have been in the process of restructuring our operations for some time to improve competitiveness. We also need to launch new products and adapt to market demand."