The main counter measure that the Brazilian government implemented to prevent the international economic crises to reach our shores was to reduce federal taxes on buying new vehicles. The cut started in December 2008 and varies from 6 to 7 % of the total price, depending on the model, since buyers of cars with smaller engines will not pay the tax for industrial goods (IPI) at all.
Surprisingly, this plan really made sales take off, considering that they had plummeted from September to December – as it happened all over the world – and suddenly began to grow reestablishing sales figures of the same months of 2008, which was already a record high in our automotive industry.
The tax relief was supposed to last only until march the 31st, but the government has already decided to maintain it at least until June, although it is demanding some compromise by the automakers not to lay off workers during this period.
This was such a good idea because the Brazilian market is not so dependent on credit, as the American. Even tough the government is also looking for providing credit to buyer of new car (and now studying doing the same to used cars market) the thing is that people in Brazil have a very recent history of debt build up, which facilitate things immensely.
The other reason it seems this kind of thing would not work to help US automakers is that there are very few taxes on cars to be cut, whereas in Brazil it represents about 50% of the final price (in the US, as far as I know it’s much, much less). The other thing is that taxes on cars in the US are mostly due for the States, which are already broke and cannot afford to provide consumers with such relief as the Federal Government can here in Brazil.
