Skip navigation
Newswire

Brazil to stick with auto safety upgrade, cut duties-sources

By Alonso Soto and Jeferson Ribeiro

BRASILIA, Dec 16 (Reuters) - Brazil has dropped plans to delay tighter auto safety standards and instead will lower import taxes on air bags and anti-lock breaks to ease their impact on car prices, two government officials told Reuters on Monday.

Concerned about a domestic auto market that has lost steam this year, the government had considered holding off the new rules, which will force local carmakers to install air bags and anti-lock braking systems in all new vehicles in 2014.

"There will be no delay," said a senior official directly involved in the talks and who asked not to be named. "Much of the impact (on prices) already happened this year, its effect will be marginal in 2014. We will reduce import taxes to 2 percent on related pieces and equipment."

Another official briefed on the matter confirmed the government's plan.

The import tax on auto parts and equipment currently ranges between 14 percent and 18 percent, according to trade ministry data.

Pricier cars could hurt sales at a time when President Dilma Rousseff is struggling to jumpstart the economy and reduce inflation with less than a year before a presidential election in which she is widely expected to run.

Her government has raised tariffs on imported cars and cut taxes for local automakers to keep afloat one of Brazil's strongest manufacturing sectors and a key source of employment.

Auto sales in Brazil are on track to shrink this year for the first time in a decade, as credit gets tighter and the government gradually winds down its stimulus.

Brazil is the world's fourth-biggest auto market, with Italy's Fiat SpA, Germany's Volkswagen AG and U.S.-based General Motors Co and Ford Motor Co selling more than 70 percent of new cars in the market.

Currently, 60 percent of cars made in Brazil have airbags and ABS brakes.