Despite rising sales in the country, vehicle production in Brazil slipped 2.6% in June compared to the same month a year ago.
Tax breaks for new car buyers saw sales jump 23% over the previous month according to automakers association Anfavea.
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The association’s president Cledorvino Belini said the group was maintaining its outlook for mild sales and production growth this year, despite a disappointing start to 2012.
In the first half of the year, production of new cars, trucks and buses fell more than 9% from a year earlier, as rising loan defaults and tighter lending cut demand in a market that was booming just a year ago.
Dealership group Fenabrave cut its forecast last week to a 0.5% drop in car, truck and bus sales this year. It had earlier projected a 3.5% rise and if sales drop this year it would be the first annual contraction in the Brazilian market since 2003.
The government has responded by introducing measures to bolster the industry, from renegotiating a trade accord with Mexico to cutting loan interest rates and industrial taxes.
The latest tax break unleashed a wave of pent-up demand in June, driving sales to 353,200 new vehicles, up 35% from a year earlier.
But output from the country’s car factories continued to lag last year’s figures as carmakers have been wary about ramping up production since stocks in the industry climbed in April to their highest level since 2008.
Volvo was the latest company to announce job cuts this year, laying off workers at a truck factory last week. Mercedes-Benz announced it would cut 1,500 workers in May.
The metalworkers union at a General Motors plant in Sao Jose dos Campos said it is concerned about what it called the “imminent” closing of an assembly line employing 1,500 workers there.
Voluntary buyout offers at the factory have been accepted by 356 workers since early June, according to union officials. The plant makes the Meriva, Zafira, Corsa and Classic passenger cars.
The Meriva and Zafira are being replaced by the new Spin made at São Caetano do Sul.
