Brazil New Vehicle Sales Fell 28.3% to 185,944 in February versus Year Earlier

By Rogerio Jelmayer 
 

SAO PAULO--Brazil's auto makers had another month of sales and output declines in February, as the industry suffers the effects of the country's sluggish economic activity and the low level of consumer confidence.

Vehicles sales including cars, light vehicles, trucks and buses totaled 185,944 units in February, down 26.7% versus January and down 28.3% compared with February 2014, according to auto maker association Anfavea on Thursday.

Output, in the meantime, dropped to 200,111 vehicles, a decline of 2.3% in February from January and down 28.9% from February, 2014.

Exports rose 31% from January to $860 million, though that was a decline of 15.5% from February 2014.

The combination of weak economic growth, high inflation and rising interest rates is hurting consumer confidence, especially with regard to big-ticket purchases, according to economists.

Brazil's economy was stagnant in 2014, according to economists surveyed by the country's central bank, and the economy is expected to contract 0.58% in 2015.

In the meantime, with official inflation at 7.36%, well above the central bank ceiling rate of 6.5%, the monetary authority is expected to raise its benchmark interest rate even more. The rate is currently at 12.75% per year.

In the first two months of the year, vehicles sales totaled 439,747 units, down 23.1% from the same period a year ago, and output declined 22% to 404,931 versus the year ago period.

Exports in the first two months fell 20.8% versus the same period a year ago to $1.5 billion

The slower sales of vehicles in the period were also attributed to the absence of tax incentives, according to Anfavea.

After implementing a tax exemption for car purchases, the Brazilian government this year reinstated a consumer tax on new vehicles. Known as the IPI, the levy raised prices 4.5% to 7%, depending on the size of the vehicle.

With a drop in sales, some auto makers in Brazil have started to lay off employees and implement voluntary severance programs and force mandatory vacations.

The largest auto makers in Brazil in terms of sales are Fiat Chrysler Automobiles NV (FCAU), Volkswagen AG (VLKAY), General Motors Co. (GM), and Ford Motor Co. (F).

Write to Rogerio Jelmayer at [e-mail]