Brazil automotive output up strongly in May ahead of programme of tax breaks for purchases

Jonathan Lopez


BUENOS AIRES (ICIS)–Brazil’s automotive producers ramped up production in May as they prepare for higher demand on the back of a government plan to spur sales, the country’s trade group Anfavea said on Tuesday.

Automotive production rose by 27.4% in May compared with April, and rose by 10.7% year on year, Anfavea added.

Sales rose month on month, but decreased year on year. According to Anfavea, the year-on-year fall was due to consumers postponing purchases ahead of the implementation of the government plan.

In May, Brazil’s cabinet announced a plan to implement tax breaks on purchases of vehicles worth up to Brazilian reais (R) 120,000 ($24,440).

During May, 176,500 vehicles were registered in Brazil, up 9.8% compared with April, but 5.6% down year on year, said Anfavea.

The government plan was published this week and its full implementation is due later this month.

Because of that, Anfavea said car sales had sharply slowed down in the second half of May, immediately after the plan was announced.

Anfavea said many car producers are already increasing their inventories in anticipation of strong demand from this month onward.

“These production and internal market movements generated for the first time in three years a stock level that only existed before the pandemic, with more than 250,000 units in the courtyards of factories and concessionaires,” said Anfavea.

“Those volumes [will] tends to be drained quickly, now that the discounts of R2,000 to R8,000 offered by the federal government are valid, in addition to any reductions offered by automakers.”

The new plan by the Brazilian government has been welcome news for the automotive industry, which had for months been in the doldrums as high interest rates and an economic slowdown put potential customers off purchasing big-ticket items such as vehicles.

Soon after the plan’s announcement, Anfavea said car sales could rise nearly 20% in 2023, compared with 2022, due to the tax breaks.

On Tuesday, the trade group invited Brazil’s vice president and minister for development and industry, Geraldo Alckmin, to its monthly press conference.

“We are very optimistic about the consumers’ response, with the preservation of employment and with the strengthening of automobile industry, which represents 20% of the manufacturing sector and employs around 1.2m people,” said Alckmin.

($1 = R4.91)


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