Brazil pushes ahead with safety upgrade, VW Kombi likely exception

BRASILIA Tue Dec 17, 2013 8:46pm EST

BRASILIA Dec 17 (Reuters) - Brazil is pushing ahead with tighter auto safety standards but will study lower import taxes to offset the impact on car prices, officials said on Tuesday, confirming a Reuters report on Monday that the government would not delay the requirements.

Along with the lower tariffs for key safety equipment, Finance Minister Guido Mantega said he was looking at an exception for a classic van made by Volkswagen.

Mantega said there was no room for an airbag or anti-lock breaks on VW's so-called "Kombi" - an icon of the 1960s still made in Brazil - so it may be the only model not required to carry that equipment starting next year.

Last week, Mantega provoked a firestorm among customer protection groups when he said concerns about higher car prices might lead the government to put off the safety standards taking effect in January.

Mandatory air bags and anti-lock brakes could push car prices up by 1,000 reais to 1,500 reais ($430-$650), according to national automakers association Anfavea.

Pricier cars could hurt sales just as President Dilma Rousseff is struggling to jumpstart the economy and reduce inflation ahead of the 2014 presidential election.

The government will present a series of measures on Monday aimed at easing the cost of better safety equipment for new cars, Mantega said. Possibilities include cutting the import tax on those parts to 2 percent from between 14 and 18 percent, as Reuters reported this week.

Mantega said lowering the IPI industrial tax for the auto industry again is not among the options considered. The gradual increase of that tax after generous incentives last year has dragged on auto sales in Brazil, which are set to drop in 2013 for the first time in a decade.

Brazil is the world's fourth-biggest auto market, with VW, Italy's Fiat SpA and U.S.-based General Motors Co and Ford Motor Co selling more than 70 percent of new cars in the market.

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