UPDATE 2-Italy's Pirelli targets Brazil with investments

* Pirelli to invest additional $200 million through 2011

* Sees Brazil sales up 10 percent in 2011 vs 2008 (Adds quotes, background; previous dateline MILAN)

SANTO ANDRE, Brazil, July 2 (Reuters) - Italian tire group Pirelli & C SpA (PECI.MI: Quote, Profile, Research) will invest an additional $200 million in Brazil through 2011, on top of the $100 million invested last year, the company's management said on Thursday.

"This is a country with a huge potential for growth, especially when you look at the ratio of inhabitants to cars," Pirelli Group Chairman Marco Tronchetti Provera told reporters at a news event in Santo Andre, one of Brazil's auto manufacturing hubs outside the city of Sao Paulo.

The new investments will allow for a 20 percent increase in production capacity of tires for cars and motorcycles. The company is also expecting a 10 percent rise in revenues from sales in Brazil by 2011 compared with last year.

New car sales in Brazil, one of the few bright spots at the moment for the global auto industry, surged 21.5 percent in June from May and are up 3 percent in the first half of 2009, according to data released on Thursday by the country's dealers' association Fenabrave.

Part of the strong performance in the auto manufacturing sector can be attributed to a tax break that the government started in December 2008 to help revive the local economy, which slipped into recession earlier this year.

The government announced on Monday that it would extend the tax break through the end of the year, meaning that dealers will be able to keep showroom prices lower.

South America accounted for 33 percent of Pirelli's overall sales in 2008, bringing in more than $6 billion in revenue, the company said.