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Brazil Auto Sales To Benefit From Measures, Recovery -Anfavea

04/05/2012 | 01:16pm US/Eastern
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--Sales recovered from a weak February, but first-quarter sales still down from 2011

--Falling rates and recovering growth should help sales rebound this year, Anfavea says

--Auto makers not yet ready for new industry rules, but seen adapting by year end

(Adds Anfavea comments throughout, starting in third paragraph.)

By Paulo Winterstein

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Brazilian incentives for the motor-vehicle industry, together with improving growth in the broader economy, should help auto sales recover after a slow start to the year, the Brazilian Motor Vehicle Manufacturers Association, or Anfavea, said Thursday.

The association said Thursday that motor-vehicle sales recovered somewhat in March, jumping 20.5% from February but still 1.8% below last year's sales during the month. So far this year, sales are down 0.8% from the first quarter of 2011. When comparing average daily sales, however, sales slumped 2.4% in the first quarter because there was one more business day in the first quarter of 2012, Anfavea noted.

"This has been an atypical and interesting year," Anfavea President Cledorvino Belini said. "With the measures being adopted by the government, the reduction in interest rates, and the economy recovering, we should see growth in the market going forward."

Total Brazil sales of vehicles, which includes cars and light commercial vehicles as well as trucks and buses, reached 300,574 units in March, from 306,135 in the 2011 period and 249,517 in February.

Sales of only cars and light commercial vehicles rose 20.3% from February, but fell 1.7% from the year-earlier period.

Belini also praised the government's new rules for the auto industry, announced earlier this week. The new measures, meant to boost the competitiveness of the local auto industry at a time when imports account for almost a fourth of sales, demand that auto makers invest in technology and purchase more locally made parts in order to avoid higher taxes. The plan goes into effect in 2013, and though Belini said many aren't yet prepared to take advantage of the new rules, he said he expects most companies to adapt by the end of this year.

"This is a big step for Brazil," Belini said of the new rules. The investment could eventually lower costs in the country "because in the future we will pay smaller royalties because the technology will have been developed here in Brazil."

Belini said he doesn't see room in a competitive market for prices to climb should companies not meet the tougher standards and be subject to the higher tax.

Vehicle output, meanwhile, climbed both in comparison with last year and with the previous month, Anfavea said. Output reached 308,494, up 4.5% from the year-earlier period and expanding 42% from February. However, year-to-date output was 11% lower than the first quarter of 2011.

Truck production, which suffered in recent months as tougher vehicle emission standards went into effect, recovered a bit, rising 33% from February and expanding 3.5% from the 2011 period. But truck output so far this year is still 33% below the first quarter of last year.

"The decline was stronger than we expected," Belini said. The extension of cheaper credit for truck purchases, announced together with the new automotive rules, should help sales in coming months, Belini said, but asked if production should return to 2011 levels, he said it's a matter of "wait and see."

Exports continued to climb, reaching $1.38 billion in March. That's a 18% jump from February and a 17% advance from March 2011. So far this year exports are up 13%, to $3.73 billion, thanks to a mix of more big-ticket items and parts, Belini said.

Fiat SpA (F.MI, FIATY) maintained its market leadership, selling 51,109 passenger vehicles in March. Volkswagen AG (VOW.XE, VLKAY) was second, selling 49,224 vehicles. General Motors (GM, GMM.U.T) sold 36,835 units last month, while Ford Motor Co. (>> Ford Motor Company) sold 22,328.

-By Paulo Winterstein, Dow Jones Newswires; 55-11-8812-5961; paulo.winterstein@dowjones.com

(MORE TO FOLLOW) Dow Jones Newswires

04-05-12 1315ET

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