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Brazil car output drops

cars brazilSAO PAULO: Brazil's car output plunged in December, the last month of a temporary tax break on auto sales, and ended 2012 worse than forecast, the national automakers' association said on Monday.


Automobile production in Brazil fell 14 percent in December from November, and 1.9 percent in 2012 compared with the previous year, according to industry group Anfavea.


The group had forecast a decline of 1.5 percent from 2011. It was the first drop in Brazil's car output in a decade.


Sales rose 15.3 percent from November, however, helped by a temporary tax cut that was due to end. Taxes on car purchases are being gradually reintroduced this year as the government expects a rebound in economic activity following a frustrating 2012.


Automakers in Brazil produced about 259,364 new cars, trucks and buses last month, according to industry group Anfavea. Auto output had shrunk 5.3 percent and sales fell 8.7 percent in the previous month.


In May, Brazil's President Dilma Rousseff announced an "emergency" tax break for the auto industry, reducing the price to consumers by around 7 percent for an initial three months. Payroll tax cuts have also eased operating costs for Brazilian manufacturers and kept unemployment near historic lows.


Rousseff has cut taxes and made other efforts to stimulate the auto industry, which contributes one-fifth of Brazil's industrial output. The disappointing result is likely to reinforce concerns that her efforts so far have been insufficient, and that broader changes, such as an overhaul of the tax code, are needed to revive the economy.


Brazil is the world's fourth-biggest car market, with 70 percent of new cars coming from Italy's Fiat SpA, Germany's Volkswagen AG and US-based General Motors Co and Ford Motor Co.


With sales in Europe plunging and a US recovery still uncertain, Brazil and other major emerging markets have taken center stage in the global auto industry's search for new growth.


Center>Copyright Reuters, 2013


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