Flex-fuel Drives Brazilian Car Market December 2005 Sales

SAO PAULO, Brazil, Jan 2, 2006; Reuters reported that Brazilian vehicle sales posted the best December on record with sales of flex-fuel cars, which run on any mix of gasoline or ethanol, leading the drive, manufacturers said on Monday.

The National Auto Manufacturers Association, known as Anfavea, said the sector registered record sales in December of 183,600 units, up 16 percent from November, which was up 15 percent from the previous month.

In December, flex-fuel cars registered record monthly sales of 120,000 units, up 15 percent from November in the category. After the technology was launched in early 2003, sales of flex-fuel models have grown steadily and accounted for 71 percent of total vehicle sales in December.

In December 2004, flex-fuel sales were 29 percent of total vehicle sales.

The cost of ethanol fuel, which is distilled from sugar cane, is about 60 percent the cost of gasoline at the pump in Brazil. Although the flex-fuel motors can run on any combination of the two fuels, cost-conscious Brazilian motorists tend to fill their tanks with 100 percent ethanol.

"The fourth quarter was pretty lively and this shows that we are going into 2006 at a recovered pace," said Anfavea President Rogelio Golfarb, who added that promotions and attractive financing were partly responsible for the improved sales.

Most major manufacturers such as Volkwagen, Ford Motor Co. and General Motors Corp. have canceled the typical year-end holidays for their local Brazilian work forces to attend to the domestic surge in demand.

Italy's Fiat, which has made cars in Brazil for decades, said it led the domestic market in 2005 with 25 percent of all light vehicle sales.

Anfavea forecast 2006 sales of 1.84 million units.

The domestic sales are a relief to the sector, which has been struggling under the weight of an appreciated Brazilian real against the dollar. The strong domestic currency has squeezed the profit margins for exports in the sector.

The more than 10 Brazilian manufacturers sold 1.72 million vehicles in 2005, up 8.6 percent compared with 1.58 million in the year before, Anfavea said. Export and production figures for the year are due out on Jan. 11.