SAO PAULO – Auto makers are expecting Brazil’s August vehicle sales and production to beat records, following July, which was the industry’s second-best month ever.

Vehicle sales hit 364,196 units last month, up 3.1% from June and an 18.9% gain on year-ago. The result was second only to December 2010, when 381,700 vehicles were delivered, according to the national association of automotive manufacturers, Anfavea

The auto makers’ group is maintaining its forecast for growth in sales and production this year, based on the expectation that lower interest rates and other government stimulus should be sufficient to push past a slow first half.

The reduction in the industrial product tax (IPI) helped spur the economy in July, and some analysts expect the government to extend the tax reduction beyond the Aug. 31 deadline, as has been the case with previous tax reductions. Media reports also say the government likely will extend the tax discount for several more months.

“We are confident that we can achieve a 4% growth in sales,” Cledorvino Belini, president of Anfavea, tells reporters. “The economy will heat up in the second half and should stir car sales.”

Despite the favorable outlook for the auto industry, gross domestic product projections for the economy as a whole were lowered earlier this week, to 1.85% from 1.9%, by Brazil’s central bank.

Anfavea expects total 2012 vehicle sales to rise 4% to 5% to 3.77 million-3.81 million units.  Although production fell 8.5% in the first seven months, the group forecasts a 2% increase by year-end.

Belini is looking for record deliveries in August due in part to buyers looking to purchase cars in case the full IPI vehicle tax resumes Sept. 1. There are 23 work days in Brazil during August, with no national holidays, which also should help sales. He expects August production to surpass year-ago’s 326,162 units.

“We understand that with a more dynamic scenario, lower interest rates and a favorable credit structure, growth is expected in the industry,” Belini says.

There currently is 27 days’ supply of inventory or 329,360 units.

Including cars, pickups, vans, trucks and buses, Brazil’s July production totaled 297,789 units, an 8.8% increase over June, but down 3.6% from year-ago.

Counting only cars, pickups and vans, the industry manufactured 282,203 units in July, up 8% from prior-month but down 0.8% from year-ago.