Brazil’s new car prices are set to gradually rise starting Thursday as a nearly year long tax benefit draws to a close.
The industrial production tax, or IPI, was cut by the federal government in December in an effort to curb a rapid decline in car sales spurred on by the on rushing global credit crunch.
Car sales quickly recovered as auto makers passed on the IPI savings to consumers, resulting in as much as a 7.4% reduction in sticker prices on new vehicles.
“Our expectation is that the return of the IPI tax can gradually be absorbed by the market,” Rogelio Goldfarb, corporate affairs director for Ford Motor Company (F) in Brazil told the local Estado news wire on Tuesday.
“Of course, the return of the tax means higher costs for the consumer,” Goldfarb added.
Car sales are expected to hit or top 3 million vehicles in Brazil this year, according to calculations made by the Brazilian Automotive Vehicles Manufacturers Association, Anfavea. In 2008, Brazil sold around 2.8 million vehicles.
-By Kenneth Rapoza, Dow Jones Newswires
