UPDATE 1-Brazil car makers finish first half of 2013 strong

Thu Jul 4, 2013 12:11pm EDT

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SAO PAULO, July 4 (Reuters) - Brazil's auto industry finished the first half of 2013 on pace for record production, as rebounding exports and a stable outlook for lower taxes offset concerns about tighter credit.

Automobile production averaged about 16,000 vehicles per day in June for the fourth straight month, helping to lift output 19 percent in the past six months compared to the start of 2012. Production eased 7.8 percent in June from May, which had one additional working day.

Brazilian car and truck output this year is likely to rise 3.5 percent to 4.5 percent from last year, according to industry group Anfavea, reaffirming prior forecasts.

Auto production in Brazil slipped in 2012 for the first time in a decade, breaking a string of rising record output as concerns about expiring tax breaks weighed on the industry.

Since President Dilma Rousseff decided in March to extend the tax breaks on locally made vehicles through the end of the year, automakers have been working at a record pace. The surge has underscored the advantages of a stable outlook compared to ad hoc extensions that kept the industry guessing last year.

The greatest risk to car makers now is tumbling consumer confidence in Latin America's largest economy, as rising inflation and borrowing costs weigh on demand.

Year-on-year growth is also likely to slow in the second half of the year, as the onset of tax breaks in mid-2012 raises the industry's base of comparison.

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

Automakers in Brazil produced about 320,800 new cars, trucks and buses last month, according to Anfavea. Sales in June totaled around 318,600 vehicles, up 0.8 percent from May.

Fiat remained Brazil's top seller of cars and light trucks in June, with about 63,800 new registrations, or 21 percent of the market. VW extended its lead over GM, selling some 58,700 passenger vehicles compared with the U.S. automaker's roughly 55,500 cars and light trucks. Ford sold about 28,700 vehicles.

French car maker Renault SA regained the No. 5 sales rank, passing Hyundai Motor Co with about 20,000 new registrations compared with the South Korean rival's roughly 15,900 sales.

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