Brazil car dealers raise 2013 outlook after solid first half

Tue Jul 2, 2013 12:06pm EDT

* Industry group lifts 2013 forecast to 3.3 pct growth

* Growth to slow in second half as interest rates rise

* Auto sales edge up 1 pct in June from May -Fenabrave

* Brazil is world's No. 4 car market

SAO PAULO, July 2 (Reuters) - Sales of new passenger vehicles in Brazil are likely to increase by 3.3 percent this year, national dealership group Fenabrave said on Tuesday, raising its growth forecast from a prior 2.6 percent after a solid first half of 2013.

Auto sales edged up about 1 percent in June from May, Fenabrave said, bringing new registrations to 1.8 million cars, trucks and buses through June. That is up 4.8 percent from the first half of last year.

Weak sales in early 2012 prompted President Dilma Rousseff to offer tax breaks for the auto industry, which makes up about a quarter of Brazil's industrial output. The lower industrial taxes announced in May, which are passed on to consumers, have been extended to the end of 2013.

The extended tax breaks have kept demand healthy so far this year, but sales growth should slow in the second half, according to Fenabrave's estimates, as borrowing costs rise and year-earlier comparisons now include the tax incentives.

Brazil is the world's fourth-biggest car market. More than 70 percent of the market is concentrated among Italy's Fiat SpA , Germany's Volkswagen AG and U.S.-based General Motors Co and Ford Motor Co.

Fiat remained Brazil's top seller of cars and light trucks in June, with 63,847 new registrations, or 21 percent of the market. VW extended its lead over GM, selling 58,749 passenger vehicles compared with the U.S. automaker's 55,484 cars and light trucks. Ford sold 28,728 vehicles.

French car maker Renault SA regained the No. 5 sales rank, passing Hyundai Motor Co with 20,018 new registrations compared with the Korean rival's 15,887 sales. (Reporting by Alberto Alerigi; writing and additional reporting by Brad Haynes; editing by Matthew Lewis)

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