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86% of All Cars Sold in Brazil Are Flexfuel Taking Ethanol, Gas or Both

Brazilian president Lula drives flexfuel vehicleAuto production in Brazil hit 2.97 million units in 2007, up 13.9% from 2006 while domestic sales totaled 2.2 million units, which was also a record, 22.9% higher than in 2006 according to the Brazilian Motor Vehicle Manufacturers Association, or Anfavea.

Anfavea attributes records in Brazilian motor vehicle production, domestic sales and export volumes to declining local interest rates and a general improvement in the local macroeconomic situation.

"Sales and production rose in 2007 because of the significant expansion in credit availability, lower interest rates and Brazil's surprising macroeconomic performance, which included rising employment and incomes," Jackson Schneider, president of Anfavea, said at a press conference,

Brazil's benchmark Selic interest rate fell continuously for two years up to October to the current level of 11.25%. Meanwhile, the economy grew approximately 5.2% in 2007.

In 2008, Anfavea forecasts production of 3.24 million units, maintaining its previous estimate, and domestic sales of 2.895 million units, slightly higher than the previous forecast of 2.88 million.

Exports in 2007 were US$ 13.2 billion, a record in dollar terms and up 8.7% from 2006. But while exports grew, the strengthening of the Brazilian real left auto producers less competitive in international terms than before, said Schneider.

"In 2007, we posted records for every measure except total vehicles exported, which highlights the problems we have had," he said.

For 2008, Anfavea forecasts exports will once again hit 13.2 billion US dollars.

Flexfuel vehicles, which run on any combination of gasoline and ethanol, saw market share rise last year. Flexfuel vehicles in 2007 accounted for 86% of sales, up from 78% in 2006.

Flexfuel sales volume reached 2 million units in 2007 from 1.43 million in 2006. In December, production totaled 215,632 units, down 17.2% from November but 21.4% higher than the same month in 2006.

Production slowed in December because some companies shut down for collective vacations, maintenance or retooling, said Schneider.

Domestic sales were 242.240 units in December, up 2.2% from November and up 18.3% from the same period of 2006.

Exports totaled US$ 1.22 billion in December, up 4.6% from November and 12.2% up from the year before. Fiat SpA was the leading auto seller in Brazil in 2007 with 523,184 vehicles, followed by Volkswagen AG with 491.788 units sold; General Motors Corp. with 444.904 vehicles sold and Ford Motor Co.

Brazil's Trade and Industry Ministry expects automakers to spend US$ 15 billion over the next three years to expand production capacity to 5 million vehicles a year from around 3.5 million.

Mercopress

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