SAO PAULO, Brazil - New-vehicle sales here will fall 5 percent this year to about 1.425 million units as high interest rates and economic turmoil continue to sap consumer confidence, says the Brazilian automakers' association, ANFAVEA.
The group says sales for the first six months slid 7.7 percent from the year-ago period, to just under 532,000 units.
But in its midyear review, the group predicted that production will remain steady at last year's level of 1.8 million cars and trucks, as exports stay strong.
Production for the first six months rose 2.5 percent over a year earlier to 847,123 units as exports surged 41 percent to just over 218,000, ANFAVEA says.
New free-trade agreements with Mexico and Chile are fueling the export boom, offsetting the collapse of the Argentine market, traditionally Brazil's biggest trading partner.
Automakers, who have invested $20 billion in new plants here since the early 1990s to meet growth projections that have not materialized, have been slashing capacity and laying off thousands of workers in recent months as the local market has imploded.
"Historically, 70 percent of Brazilian vehicles have been bought on credit," says Ademar Cantero, the trade group's institutional affairs director.
"Basic interest rates of 24.5 percent cannot help the sector."
Last month, Volkswagen, the Brazilian industry's biggest producer, announced that it would cut nearly 4,000 jobs to counter the weak auto market.
Its sales through June are off more than 20 percent, and it has slashed output by 13 percent.
Fiat, General Motors and Ford Motor Co. have furloughed workers for varying lengths of time.