Despite Economic Crisis, Brazil Car Sales Break Records
06 Juli 2009 - 8:24PM
Dow Jones News
American and European car makers are expecting recording
breaking sales in Brazil, even as the economic crisis drags on in
their home markets.
Thanks to a combination of tax breaks and cheaper credit,
Volkswagen (VLKAY), Fiat (FIATY), General Motors (GM) and Ford (F),
plus smaller names, are likely to sell 6.4% more cars this year to
top around three million vehicles, according to the Brazilian Motor
Vehicle Manufacturers Association, Anfavea.
"If we are going to reach that number this year, it's because of
better consumer confidence, tax reductions and the return of auto
lending have enticed car buyers," said Jackson Schneider, Anfavea's
president.
The help first arrived in the form of a government tax break
late last year. The so-called IPI industrial tax was cut and car
makers took around 7.4% over the sticker price of new vehicles.
With sales mixed in February and down in April, the government
decided to extend a tax break to Oct. 31.
Automobile manufacturing is an important segment of any national
economy. Not only is it a high wage job, it has an enormous supply
chain from auto parts makers to steel companies that depend on
demand from car makers.
To keep those companies in the black during one of the worst
global recessions since World War II, Brazil's government forced
its hand on state and federally owned banks to cut interest rates
on new car loans.
Worldwide, the automotive market has required massive government
support because of sharp sales declines, especially in the U.S. and
Europe. But much of that support has come in the form of bailout
money to pay short term loans.
General Motors, the most noted of cases, filed for bankruptcy
protection recently and a U.S. federal judge approved the sale of
GM's assets to a new government-run company. GM's shares delisted
from the New York Stock Exchange.
Privately held Chrysler folded into Italy's Fiat SpA.
The help that didn't come in the form of cash bailouts led to
higher sales. Some European countries launched trade-in incentives
for old cars, while others gave tax breaks for new, fuel efficient
vehicles.
Sales in Germany and France improved through the trade-in plans.
Germany sold 22% more new cars in Jan-May 2009 than it did in the
same period last year, for a total of 1.6 million vehicles,
according to the European Automotive Manufacturers Association,
Acea.
France saw sales rise in May by 11.8% to 184,463 units when
compared with May 2008, but are still down 1.4% to 896,178 from
January to May when compared to the same period last year,
according to Acea.
Meanwhile, in Brazil, June car sales hit a monthly record of
300,157 vehicles, up 17.2% from June 2008's record-breaking monthly
sales. Local car makers have sold 1.44 million vehicles in the
first half of 2009, up 3% from the year before.
"The three million vehicle forecast for Brazil sounds very
sustainable," said Alexandre Andrade, an auto industry consultant
for Tendencias in Sao Paulo.
Brazil sold 2.8 million vehicles in 2008.
"The government had a big hand in this. First with the tax break
and then with lowering credit from government banks like Banco do
Brasil. The private banks followed later, but the extra credit and
longer loan terms have been just as big a deal to car makers as the
tax break," Andrade said.
-By Kenneth Rapoza, Dow Jones Newswires, 5511-2847-4541,
kenneth.rapoza@dowjones.com