SÃO PAULO—New-vehicle sales and production in Brazil declined in August from a year earlier as the economy’s poor performance and presidential elections in October pushed consumers to delay their purchase decisions.
Vehicle sales, including cars, trucks and buses, fell 17.2% from a year earlier to 272,492 and 7.6% from July. Production dropped 22.4% from August 2013, to 265,910, but increased 5.3% from July, according to auto maker association Anfavea.
“The economic and political scenario is creating a lot of uncertainty among consumers right now, and that has a direct impact on the sale of vehicles,” said Rodrigo Baggi, an analyst at local consultant group Tendencias. “Consumers prefer to postpone the purchase of a new vehicle until they have more confidence in the country’s economic conditions and more visibility in the political process,” he added.
Brazil’s gross domestic product shrank 0.6% in the second quarter from the previous three months, and first-quarter data was revised to a 0.2% contraction, the Brazilian Institute of Geography and Statistics, or IBGE, said last week.
Meanwhile, the country’s political outlook is up in the air, with recent polls showing opposition presidential candidate Marina Silva beating incumbent President Dilma Rousseff in the second round of voting in the October elections.
Vehicle sales dropped to 2.23 million units in the first eight months of the year, a 9.7% decline from the same period last year. Automobile production dropped 18% in the first eight months to 2.08 million units.
Exports in August reached $1.01 billion, down 39.5% from August 2013, and up 2.4% versus July.
In the January-August period exports totaled $8 billion, a drop of 27.2% versus the same period of 2013. Exports have been hurt by an economic crisis in Argentina, which represents more than 80% of Brazil’s vehicle exports.
The car industry in Brazil is suffering despite sales incentives. The government recently decided to extend through the end of this year a tax break on new-car purchases that had previously been scheduled to end July 1.
After a decade of strong growth, helped by government incentives, credit expansion and salaries increases, Brazil’s car sales last year fell 0.9% to 3.7 million.
With the drop in sales, some auto makers in Brazil have started to lay off employees and adopt voluntary severance programs and mandatory vacations.
The largest auto makers in Brazil in terms of sales are Fiat F.MI +1.39% SpA; Volkswagen AGVOW3.XE +1.87% ; General Motors Co. GM +0.46% and Ford Motor Co. F -1.14%
– WSJ
