German automaker Volkswagen is planning to invest $529m to commence the local assembly of new Golf model as well as restart production by its Audi division in Brazil.

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The automaker's subsidiary Audi will also invest about $200m to expand facilities at its factory in Sao Jose dos Pinhais located outside the capital of Parana.

The move follows measures taken by the Brazilian government to increase taxes on imported vehicles and provide tax breaks for carmakers that increase domestic investments.

Audi Board of Management chairman Rupert Stadler said, "By producing in Brazil, we will create the basis for further growth in the region."

With the investment, Audi will start the local manufacturing of its Q3 and new A3 Sedan by 2015, for which it has already begun the preparations.

Audi Procurement Board of Management member Bernd Martens said, "For the production of the A3 Sedan, we want to purchase a lot of components locally; we therefore plan to establish close relationships with Brazilian suppliers at an early stage.

By 2020, Audi plans to make significant investments in its production sites in Germany and Hungary in order to deliver two million cars per year to its customers across the globe.

Additionally, Audi will open its second plant in China by late 2013 as well as start operations at its new automobile plant in Mexico by 2016 as part of its plans to expand worldwide.

Volkswagen is also reported to announce an investment of BRL700m ($307.2m) for the production of its new Golf model at the factory in Brazil.

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