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July 8, 2016

Brazil sales show stabilising signs

Brazil's car market shows signs of stabilising after a brutal contraction, which drove sales to the lowest level in a decade during the first half of the year, the national automakers association has said.

Brazil's car market shows signs of stabilising after a brutal contraction, which drove sales to the lowest level in a decade during the first half of the year, the national automakers association has said.

Auto production fell just 3% in June from a year earlier, industry group Anfavea told Reuters , compared to a 30% drop around the start of the year. Output rose 4% in June from May and sales increased nearly 3%.

"It seems the market hit bottom which is positive because that means we should see the start of a recovery around the end of the year, gathering strength beginning next year," Anfavea president Antonio Megale told the news agency.

That would end the worst crisis ever for Brazil's beleaguered auto sector, which makes up about a fifth of national industrial output and has seen auto sales cut nearly in half compared to a 2012 peak, when Brazil was briefly the world's fourth largest market.

Weak consumer confidence and towering interest rates still weigh on demand, however, and few economists expect a swift rebound from Brazil's worst economic crisis in generations.

Anfavea slashed 2016 forecasts last month to a 19% drop in auto sales and a 5.5% decline in output.

All of the global carmakers in Brazil have been battered as a result of the economic crisis but those with the longest track record in the country – Fiat Chrysler, Volkswagen , General Motors and Ford – have been hit the hardest.

Those four had a near deadlock on Brazil's market before it opened in the 1990s and still accounted for three quarters of Brazilian car and light truck sales in 2010. But their combined market share has dropped to around 55% in the first six months of this year while Asian competitors more than doubled their market share in four years to nearly 30%, Reuters noted.

Volkswagen 's market share has fallen the most since 2012, losing 8 percentage points and ceding second place in the market to General Motors .

Ford has slipped from fourth place to sixth this year, overtaken by Toyota and Hyundai , which arrived in Brazil less than a decade ago through a partnership with local manufacturer CAOA.

Hyundai , Toyota and Honda have more than doubled their market share in the past five years, as they opened new factories due to recent local content rules, Reuters added.

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