Vehicle sales soared ahead of the scheduled Aug. 31 expiration of the discount on the industrial product tax, and waiting lists for some models reached up to three months. The government since has extended the tax cut through October.
Auto makers are churning out new compact cars for the domestic market as exports slow due to an unfavorable exchange rate, logistics costs and obsolete models for more demanding international consumers.
A sharp hike in the IPI tax last year was part of an effort to discourage growing import sales taking advantage of the falling local currency and Brazilians’ interest in more up-to-date foreign models.
The auto maker’s first step is the inauguration this month of its third plant in Brazil that initially will produce 70,000 Etios compact cars annually. If sales are favorable, the number likely will expand to 100,000 units.
The industry is maintaining its forecast for growth in sales and production this year, based on the expectation that lower interest rates and government stimulus should be sufficient to push past a slow first half.
Brazil needs the approval of each nation in the Mercosur trade bloc, including Argentina, to revamp its automotive accord with Mexico. Meanwhile, Argentina is pressing Brazil to buy more of its auto parts.