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Brazil Auto Sales Projected to Decline 19% in 2009
Jan 23, 2009

The Brazilian auto industry is likely to see slump in sales this year on account of global economic downturn, tight lending conditions and higher interest rates.

Fenabrave, the national dealers’ association, said the largest Latin American economy, Brazil, is anticipated to see a slump of 19% in sales of new cars and trucks in 2009 due to credit crunch and economic slowdown, as reported by
REUTERS.

Fenabrave expected the vehicle sales to reach 2.155 Million Units in 2009 against the estimated 2.66 Million Units last year, when sales should surge 13%. New car registrations declined 26% in November 2008 from October 2008 and 25% from November 2007. The overall sales of cars and trucks totaled 177,800 Units. Exports also slumped significantly to $1 Billion during November 2008, down 23.1% over the previous month.

The gloomy outlook for auto sales in Brazil is based on drastic fall during October and November 2008 owing to liquidity crunch in credit market and weak consumer confidence. The Brazilian credit market is also affected badly by the global financial crisis; consequently, credit-sensitive domains like auto industry are badly hit.  This downfall in vehicle sales during the two months prompted automakers such as GM and Fiat to send their thousands of employees on leave and cut down production.

However, this is the first time in the last three years when the Brazilian auto industry experienced slowdown. Robust and continuous growth in the past has encouraged auto manufacturers from across the world to invest billions of dollars in the Latin America’s biggest economy to boost capacity.

Besides blocking the continuous growth, the auto sales will dramatically slip down in 2009, but the damage could be reduced provided the government takes appropriate measures.

The government of Sao Paulo and the federal government stood up to give some relief to the auto industry as they instructed state banks to release 8 Billion Reais ($3.48 Billion) in credit market for car sales. Despite the government’s notification, only a small proportion of that money is made available, forcing auto manufacturers to go for blow-out sales system to avoid building inventories.

According to a Research Analyst at
RNCOS, “The Brazilian auto industry is expected to see a downturn in 2009. Screwing up of lending norms and tough financing is thwarting potential buyers from showrooms and dampening the auto demand. The situation is further aggravated by the ongoing financial crisis.”

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