Boston, MA -- (ReleaseWire) -- 12/18/2012 -- Passenger car sales in Brazil decreased 5.2% y-o-y in September, to 214,351 units. Over the first nine months of 2012, sales in this segment have increased 7.2% y-o-y, to 2,100,365 units. BMI has long maintained that passenger car sales in Brazil will increase 3.9% over the course of the year. We maintain this view for now, as we believe sales in this segment will moderate over the remainder of the year, and drop in line with our forecast. Earlier in 2012, car sales were boosted significantly through stimulus measures aimed at boosting investment and consumption, including cheaper credit for vehicle loans and tax breaks for domestically produced vehicles. Although the stimulus measures are in place until the end of October, we believe their effects were felt the most in the June-August period, and that their impact will be more subdued in the latter stages. We believe that greater access to credit for vehicle loans will provide some modest increase in sales over the remainder of the year, but not substantially so.
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Over the long term, we maintain a bullish outlook for the passenger car segment in Brazil, and expect to see strong and sustained growth over the remainder of our 2017 forecast period.
Vehicle production in Brazil increased 8.2% year-on-year (y-o-y) in September, 282,540 units. Over the first nine months of the year, production declined 5.7% y-o-y, to 2,462,873 units. In July, we revised down our vehicle production forecast, to a 5% decrease in 2012, predicated on our belief that the Brazilian economy, with its industrial and vehicle production, will pick up in the second half of the year. This view is continuing to play out, and we maintain our forecast for now.
BMI believes that despite weak Q212 growth, we will see a modest pick-up in economic growth in coming quarters, in line with our 2012 real GDP growth forecast of 1.8%. The July industrial production reading recorded the most moderate contraction since March, at 2.9% y-o-y. We believe, however, this will resurge somewhat in H212. This has informed our belief that vehicle production will pick up in the remainder of the year.
Further, BMI sees little to suggest substantial further appreciation for the Brazilian real in the short term. Rather, we believe central bank intervention, both through monetary easing, as well as directly purchasing US dollars, will mute any upside potential for the currency. An appreciation of the currency would provide further downside risk to our forecast, as this would make exports less competitive.
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