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Tax Breaks Put Brazilian Auto Sales Back on Track
Feb 03, 2009

After declining consecutively for two months in October and November, the Brazilian automobile sales bounced back in December 2008 although the global economic downturn continued to deepen.

According to Brazil’s national dealers’ association Fenabrave, sales of new cars and trucks in Brazil spurred 11.5% in December 2008 over November 2008 despite sluggish demand due to the global crisis, as reported by Reuters.

The total automobile sales, including LCVs (vans and pickup trucks), buses, trucks and motorcycles, jumped to 345,447 Units during December 2008 from 309,712 in November 2008. After two months of depression (sales plunged 25.7% in November 2008 and 11% in October 2008), sales bounced back in December 2008. However, the sales were significantly down by 16.39% from the corresponding month last year. Overall, auto sales surged 14.15% in the entire 2008.

In tough economic times, rise in auto sales is good news and the credit goes to the Brazilian government that cut down IPI industrial products tax on vehicles to raise sales. This enabled auto dealers to reduce prices that attracted customers. Thus, the Brazilian auto sales rebounded at the end of 2008.

In addition, the Brazilian government has cut down financial taxes to increase the availability as well as attractiveness of the loans so that people could easily access auto loans. Automakers have also contributed by offering a series of discounts to wipe off their piled up inventories. Discount offers gave a reason to buyers to visit showrooms and thus, sales climbed during December 2008.

This has made the association to revise its automobiles sales forecast for 2009 to 4.895 Million vehicles with an increase of 3.1%. Before the announcement of tax breaks by the government, Fenabrave projected that sales would fall 19% in 2009. The outlook for 2009 will again be revised after expiring of tax breaks on March 31, 2009.

According to a Research Analyst at RNCOS, “The government’s measure and year-end sales at dealerships all across the nation infused some fresh life into the auto market. But still, auto manufacturers are gearing for a tough ahead. Many manufactures have sent tens of thousands employees on leave to curb building inventories.”

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