Car production in Brazil rose 10.6% year on year in August while sales in the month increased by 15.3% month over month and 28.2% year over year to 420,100 units in August in the wake of a consumer rush to take advantage of government tax breaks.

The Brazilian government, in order to counter an economic slowdown and protect auto industry jobs, started giving tax breaks from May to increase consumer demand, noted Reuters. The government extended the tax breaks for another two months in order to give impetus to the lagging economy.

"Sales are expected to remain strong and production should continue to increase in coming months as stocks wind down," said Rodrigo Baggi, an economist with Tendencias Consultoria in Sao Paulo, who expects the tax breaks to be extended to the end of this year.

Automakers in the country produced 329,300 new cars, trucks and buses in August, posting an increase of 1% from the 326,200 units produced in August 2011. Year to date production however decreased 7.2%, while sales for the period increased 5.5%

Brazil's dealership association, Fenabrave, now anticipates auto sales to rise 8.05% to 3.7m vehicles in 2012. It had earlier forecast a decline of 0.4% in auto sales for the year.

Fiat's cars and light trucks sales increased 16.7% to 98,211 units in August compared to July 2012. Volkswagen's sales increased 13.5% to 89,351 vehicles.

GM's sales of cars and light trucks increased 28% to 75,872 units in August, while Ford's sales increased 4.8% to 31,079 vehicles.