Tax break boosts Brazil's auto sales in March

• Source: Xinhua
• [11:17 April 10 2009]
• Comments

Driven by a tax break on cars, auto sales in Brazil went up 36.2 percent in March, a strong period of the year for sales, a report from the industry said Monday.

Vehicle sales in March totaled 271,400 units in March, up 36.2 percent from February and 16.9 percent from the same period in 2008, the National Association of Motor Vehicles Producers (Anfavea) said in the report.

The good results, despite the effects of the international financial crisis, were attributed to a tax cut for the auto sector, said the report.

The Brazilian government enacted tax cuts last December in the face of shrinking forecasts for gross domestic product amid the global economic downturn.

The measure, which aimed at boosting vehicle sales and avoiding mass unemployment, had led to a five to seven percent fall in the final consumer price for vehicles.

Consumers had rushed to purchase cars as the tax break was due to be over by the end of March, said the report.

On March 30, the Brazilian government announced to extend the tax break for another three months. Officials said they were counting on the domestic market to help the economy avert a recession and hoped the extension would spark internal demand.

According to Anfavea, if the tax cut had not been extended, there would be a 30 percent reduction in auto sales in the second quarter of 2009. The downturn would lead to a significant reduction in Brazil's industrial activity levels, as the auto sector is responsible for 23 percent of the overall industrial output.

In the first quarter of 2009, domestic vehicle sales totaled 668,300 units, rising by 3.1 percent from the same period in 2008,which could be attributed to the tax cut as well.

The vehicle production in Brazil reached 272,400 units in March, up 34.2 percent from February and down four percent from the same period last year. In the first quarter of 2009, the production totaled 660,000 units, down 16.8 percent from the same period in 2008.

Auto exports totaled 34,400 units in March, up 15.5 percent from February and down 46.8 percent from March 2008. The revenues originated from car exports reached 620.3 million U.S. dollars, up12.8 percent from February and down 46.2 percent from the same period last year.

In the first quarter of 2009, vehicle exports fell 52.3 percent, totaling 86,000 units; the revenues originated from those reached 1.59 billion U.S. dollars, down 50.8 percent from the amount registered in the first quarter of 2008.

The tax break in the first quarter might not be enough to avoid a decrease in both sales and production in 2009. According to Anfavea, even with lower taxes, Brazil will register a 3.9 percent fall in vehicle sales this year, which will total 2.71 million units in 2009, the first annual reduction since 2003.

The organization said the vehicle production in 2009 will total 2.86 million units, down 11.2 percent from the amount registered last year and the first fall since 2002. Vehicle exports will total 500,000 units in 2009, down 32 percent from last year. Revenues will fall 39 percent, totaling 8.5 billion U.S. dollars.

In 2008, Brazil registered vehicle production of 3.21 million units and sales of 2.82 million units, both record-high figures. Exports totaled 727,300 units and earned revenues of 13.9 billion U.S. dollars.