Brazil automakers expect sales slowdown-industry

SAO PAULO, Aug 6 (Reuters) - Brazil's automakers' association expects car sales to slow in the second half of the year after July's spike in sales, the group said on Wednesday.

Anfavea, the auto manufacturers' association, pointed to the rising costs of consumer loans as a reason for the anticipated slowdown.

Just over 320,000 cars rolled off assembly lines in July, up 19.8 percent over the same month a year earlier and 3.5 percent more than in June, Anfavea said.

Domestic sales grew even more with 288,100 vehicles, an increase of 32.6 percent year-on-year and 12.6 percent over June.

Higher wages and cheaper credit have pushed up car demand and are fueling economic growth of around 5 percent. Brazil has become a major market for several international manufacturers.

Japanese automaker Toyota Motor Corp (7203.T) (TM.N) will invest between $600 million and $700 million to build a new plant in Brazil to keep up with the surging demand, Brazil's trade and industry minister said in July.

But with interest rates on the rise, automakers expect demand will ease in coming months.

By year-end Anfavea expects output to total 3.43 million vehicles from 2.01 million units at the end of July. That is a reduction from 287,000 units per month on average through July to 210,000 units per month for the remainder of the year.

The central bank has increased its benchmark Selic rate by 1.75 percentage points this year in an effort to help curb rising inflation.

The country's car market is dominated by global automakers such as Italy's Fiat (FIA_p.MI), Germany's Volkswagen AG (VOWG.DE), U.S.-based General Motors Corp GM.N and Ford Motor Co (F.N), followed by Japanese and French manufacturers.

In Brazil, around 90 percent of all new cars sold are equipped with flex-fuel engines, which run on either gasoline or cane-based ethanol, or any combination of the two. (Reporting by Vanessa Stelzer, writing by Raymond Colitt, editing by Leslie Gevirtz)