Brazil auto output stagnates in February, sales tumble

SAO PAULO: Auto production in Brazil stagnated in February and sales continued to tumble as carmakers got off to their weakest start in at least five years, deepening the crisis in an industry that is shedding jobs and stressing trade relations.

Automobile output in Brazil slid 2.3 percent and sales tumbled 26.7 percent in February from January, automakers' association Anfavea said on Thursday.

Both production and sales have fallen more than 20 percent in the first two months of the year compared to the start of 2014, which turned out to be the toughest year for the auto industry since 1999.

Anfavea officials conceded they will have to cut their 2015 estimates of flat sales and 4.1 percent production growth, issued just two months ago. Earlier this week Brazilian dealership association Fenabrave slashed its 2015 sales forecast, projecting a 10 percent drop - the biggest in 16 years.

In just a few years, Brazil's auto industry has gone from a bright spot for global carmakers to a case study in the sharp economic slowdown that threatens to become the worst recession in 25 years for Latin America's largest economy.

Rising interest rates and accelerating inflation are battering the confidence of Brazilian consumers and businesses, casting a pall over one of the world's five biggest car markets.

This year President Dilma Rousseff has also withdrawn the tax breaks meant to rescue the industry three years ago, worsening the slump and leading carmakers to slash payrolls by nearly 9 percent in the 12 months through February.

Global carmakers including Fiat Chrysler Automobiles NV , Volkswagen AG, General Motors Co and Ford Motor Co invested heavily in Brazilian operations over the past decade as domestic sales doubled.

Fiat remained Brazil's top seller of cars and light trucks in February with almost 35,900 new registrations.

GM slid from a close second into third place, selling just over 28,000 passenger vehicles, behind VW's nearly 31,000 new registrations. Ford sold around 19,200 vehicles.

Automakers in Brazil produced some 200,100 new cars, trucks and buses last month. Sales totaled about 185,900 vehicles.