August 2, 2012 / 12:15 AM / 7 years ago

UPDATE 1-Brazil car sales surge 22 pct to July record-group

* Sales jump again on gov’t tax breaks to help key sector

* Gov’t has said it may not extend IPI tax breaks past August

SAO PAULO, Aug 1 (Reuters) - Brazilian auto sales set a second straight monthly record in July, an industry group said on Wednesday, as tax breaks and lending incentives helped the car industry turn the corner on a weak first half.

Sales of cars and light trucks climbed 22 percent from a year ago to some 351,000 vehicles, according to data unveiled by dealer association Fenabrave, up 3 percent from a record June to the best July ever.

The growth reflects the impact of government stimulus at the end of May, when officials cut an industrial tax on some vehicles and freed up bank deposit requirements in exchange for sweetened terms on auto loans.

Brazil’s auto market had contracted nearly 5 percent through May, crimped by rising household debt and tighter lending and pushing automaker inventories to nearly four-year highs.

But after two bumper months, dealerships have sold more than 1.98 million vehicles year-to-date through July, up 3 percent from the first seven months of 2011.

Daily sales volumes averaged around 16,000 vehicles in July, according to Thomson Reuters calculations, easing from 17,000 per workday in June, but still well above daily sales of about 13,000 vehicles through May.

Attention is now focused on how the end of tax incentives, slated to expire this month, will affect some of the world’s largest automakers with operations in the country. The top carmakers in Brazil include Italy’s Fiat SpA, Germany’s Volkswagen AG and U.S.-based General Motors Co and Ford Motor Co.

Finance Minister Guido Mantega said on Tuesday that strong July car sales confirmed an economic rebound, but he said the government was not “currently” studying an extension of the so-called IPI tax break past August.

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