--Brazil's vehicle production and sales hit records in August, aided by tax breaks

--Brazil's Anfavea maintained forecasts for 2012 production, sales and exports

(Updates with figures from the first eight months of the year and comments from Anfavea president.)

 
    By Rogerio Jelmayer and Paul Kiernan

SAO PAULO--Brazil's vehicle production and sales reached record highs last month, as consumers continued taking advantage of recent tax cuts implemented by the government to offset a slowing domestic economy.

Auto sales in August rose 15% from July and 28% from a year earlier to an all-time high of 420,080 units, the National Association of Motor Vehicle Manufacturers, or Anfavea, said Thursday.

Production rose 1% last month from August 2011, reaching a record 329,266 vehicles, while auto exports fell 3.5% from a year earlier to $1.42 billion, Anfavea said.

Brazil reduced auto taxes in May after slowing economic growth and tighter auto credit led to a drop in sales. The tax breaks were set to expire at the end of August, spurring the jump in last month's sales, but the government decided last week to extend the breaks for another two months.

"The reduction of the IPI [tax] has a multiplier effect on the economy," Anfavea President Cledorvino Belini said at a press conference, adding that the auto sector accounts for 23% of Brazil's industrial output and 200,000 jobs.

Daily vehicle sales jumped to 16,900 units after the tax cut from 12,300 beforehand. Mr. Belini said the industry's inventories fell to 19 days in August from 27 days in July as rapid-fire sales depleted stocks.

"We expect sales to continue at the same daily average for the next two months with the IPI reduction," Mr. Belini said.

But Anfavea maintained its key forecasts for 2012. Sales are seen rising 5% on the year to 3.81 million vehicles, production is expected to rise 2% to 3.48 million units and exports are expected to fall 3% to $15.7 billion.

"Perhaps we'll have to revise our sales projections higher going forward, but it's still early for that," Mr. Belini said.

Truck sales in Brazil, slowed by the weakening local economy, stood at 11,461 units in August, up 5% in July but down 30% from a year earlier. Mr. Belini said that with the Brazilian economy expected to recover in the second half of 2012 and new government measures to reduce financing costs in place, truck sales should grow.

Fiat SpA (FIATY, F.MI) was the top-selling auto maker last month, with 81,372 units sold. Volkswagen AG (VLKAY, VOW.XE) was second in sales with 76,960 units, and General Motors Co. (GM) occupied the No. 3 spot with 64,258 vehicles.

In the first eight months of the year, 2.5 million vehicles were sold in Brazil, up from 2.37 million units between January and August of 2011, Anfavea said.

Auto production in the January-August period stood at 2.18 million units, down from 2.35 million produced a year earlier.

Exports in the first eight months of 2012 fell to $10.13 billion from $10.44 billion between January and August of 2011.

Write to Rogerio Jelmayer and Paul Kiernan at brazil@dowjones.com