The best January ever has brightened the spirits of Brazilian auto industry executives. Sales rose 16% year on year while production was up 32%.

However, comparable numbers were low early in 2012. The medium and heavy truck market, for example, practically came to a halt in last year’s first half caused by the technology switch of diesel engines from Euro 3- to Euro 5-compliant that pulled forward sales into 2011.

The domestic market for cars and light commercials in early 2012 suffered from lack of regular, easy financing. So, there were ongoing rumours about the government slashing IPI tax to stimulate demand which happened in May.

What helped heated sales this last January was the inventory of light vehicles produced in the last months of 2012. Strong sales were partly because the first of a three-step IPI tax hike planned (by June) helped lure customers ahead of the planned price rises.

This continued in February, although at a slower pace.

Robust January numbers, the three-stage IPI  hike and some GDP recovery are likely to make 2013 another record year.

Anfavea also believes that production will increase 4.5% this year to 3.5m units overall. Yet this growth will take place in lieu of imports. Exports of fully built units (FBU) will keep falling by 4.5% versus 2012 and that's bad news.