Vehicle sales in Brazil set a second straight monthly record in July with tax breaks and lending incentives helping the industry turn round a weak first half.
Sales of cars and light trucks climbed 22% from a year ago to around 351,000 vehicles, according to dealer association Fenabrave, up 3% from a record June to the best July ever.
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At the end of May the government cut an industrial tax on some vehicles and freed up bank deposit requirements in exchange for better terms on loans for cars.
Brazil’s auto market had contracted almost 5% in tehf irst five months, held back by rising household debt and tighter lending.
Following two bumper months, sales have now hit almost 2m to date, up 3% fvrom the first seven months of 2011.
However, attention is now focused on how the end of tax incentives, which expire this month, will affect sales. The finance ministry has said that there are no current plans for an extension.
Argentina’s vehicle exports are expected to experience their biggest fall in a decade this year this year, despite the sales rebound in neighbouring Brazil which accounts for about half its automobile output.
Demand has shrunk due to sluggish economic conditions and improved prospects later this year will not be enough to stem losses in output and sales in 2012 as a whole, industry sources say.
Analysts expect Argentina’s vehicle exports to drop 17% compared with 2011, shaving 0.6% off Argentine economic growth this year.
The analysts also fear Argentina’s economy will grow even less or shrink this year, hit by falling external demand, high inflation, a smaller grains crop and state currency and import curbs.
In the first half of this year, auto exports fell 28% from the same period of 2011, according to data released by private carmaker group ADEFA.
About 80% of Argentina’s auto sales abroad go to Brazil. Mexico is another regional buyer although it accounted for just 2.5% of exports in the first half of this year.
