BRASILIA, Brazil (Reuters) -- Brazil on Tuesday unveiled a plan to kick-start the nation's stalled auto sector with a tax cut for car makers that is meant to bring cheaper prices for consumers.
The measures are aimed at reversing a sharp downturn in auto sales in Brazil that have led to a recent round of job cuts at automakers such as Germany's Volkswagen AG.
Finance Minister Antonio Palocci said the government would reduce the amount of Tax on Industrial Products (IPI) auto makers pay on cars with an engine capacity of up to 2000 CC.
In return for the tax break, auto makers cannot fire workers and are expected to pass onto consumers a three percentage point reduction in the IPI.
The tax breaks will apply until the end of November.
Auto sales fell 8 percent in the first half of the year as consumers stayed away from the dealerships given the high cost of financing a car purchase and general economic slowdown.
To counteract the falling sales, many auto makers have given their workers temporary leave or tried to lay them off.