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Brazil Auto Sales Up 36% in March
Apr 15, 2009

The Brazilian auto sales in March 2009 surged 36.1% against February 2009 on the back of tax incentives announced by the government in December 2008 and improvement in credit market.

Fenabrave, National Dealers’ Association, said on April 3, 2009 that sales of buses, trucks and cars in Brazil soared 36.1% in March 2009 from February 2009, as reported by REUTERS.

According to Fenabrave, the Brazilian automobile sales grew 16.9% to 271,393 Units in March 2009 against the corresponding month a year ago. Brazil represents a major market for many global auto giants including Italy’s Fiat SpA, US-based General Motors Corp. and Ford Motor Co. and Germany’s Volkswagen AG.

The rise in auto sales during March 2009 was largely contributed by tax cuts and fall in interest rates that encouraged auto buyers to flock to showrooms. 

Given the steep fall in car sales and companies’ decision to cut down production, the Brazilian government announced tax cut on new car purchases in December 2008. Earlier, consumers were refraining from making hefty purchases as global credit crunch made vehicle loans costlier and thus, apparently inaccessible. Moreover, the government on March 30, 2009 further extended the duration of tax cuts till June 2009.

Apart from reducing vehicle registration fee and sales taxes, the administration has increased the flow of liquidity for banks and other financial institutions to promote auto loans.

Expressing surprise on sudden increase in auto sales, industry experts state that the statistics show the government’s preparation for raising sales. If the government had announced the extension of tax incentive at the beginning of March 2009, the sales figure wouldn’t have been as good. In fact, the government created strong demand by waiting till the end of the month and then announcing the extension of tax incentive period. 

The government initiatives are very critical for boosting the vehicle sales and to sustain growth in the country’s economy. The automobile industry accounts for nearly 23% of total industrial production in Brazil. 

According to a Senior Researcher at RNCOS, “The recent industrial tax cut has given a big relief to the Brazilian automobile industry which was under the immense pressure to overcome the after effects of 2008 financial crisis. But the industry has to find other solutions as the tax cut is a temporary measure announced by the government to boost the automobile sales. Overall, our recent research results indicate to a positive outlook for the automobile industry in Brazil due the government commitment to the industry.”

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