Tax Breaks Give Brazilian Auto Sales a Jump

Brazilian Fiat Doblò Thanks to a temporary Brazilian government tax break that reduces car prices Brazil's auto sales rose slightly in February, Brazil's National Motor Vehicle Manufacturers Association, Anfavea, announced on Monday.

Motor vehicle sales for February rose 1% to 199,366 units, but fell 0.7% from a year earlier when consumer credit was abundant. Production rose 9.2% to 201,685 units in February from January, but fell 20.6% from a year earlier.

Brazil's auto market as in the rest of then world is suffering from the same credit constraints and a rapidly ailing economy. The big three auto makers in Brazil (GM, Volkswagen and Fiat) cut back production in November and December, but output picked back up in late January and February after steep price discounts attracted consumers back to car lots.

Stocks of unsold vehicles have dwindled down to manageable levels, according to company executives from General Motors and Fiat. In February car exports rose 27.1% to US$ 528.8 million following sharp declines since November. But export revenue is down 49.2% compared to February 2008 figures, Anfavea said.

Anfavea President Jackson Schneider said the industry didn't yet have sales estimates for 2009.

"There is still a lot of uncertainty in the market and so we prefer to make an internal forecast on the domestic and export markets in April," he said, adding that by then, Anfavea will have sales figures for the first quarter fully confirmed.

So far this year, Brazil produced 386,450 cars and light trucks, down 24.1% on the year. Sales over the two-month period are down 4.6% to 396,820 units and exports are down 53.8% to US$ 962.7 million.

Most of the February car sales were increases registered by popular cars made by Volkswagen, which far surpassed rival Fiat, up 12.2% to close the month at 42,531 units. The auto maker sold 80,452 cars in January and February combined, relatively flat from the same two-month period last year.

Fiat sales rose 1% in February to 37,196 units, and 74,029 vehicles in January and February, down 12.4%. General Motors sold 28,406 units in February, down 13.5%. So far this year, the ailing US auto maker's sales in Brazil are down 21.1% to 61,246 units.

Ford sold 17,201 vehicles in February, down 0.9%, but sold 48.8% more in the first two months of the year from the first two months in 2008. Ford has sold 34,564 units.

Sales of low-cost cars, especially the VW Gol have been helped by steep cuts in sticker prices thanks to the temporary cut in the IPI industrial tax. That tax will return in April, though industry executives are lobbying to keep the tax break in place until the economy shows signs of rebounding.

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