Brazil, the world's fourth largest car market, sold a record 3.8 million vehicles last year, according to industry data released this week. Brazil's National Association of Motor Vehicle Manufacturers (ANFAVEA) reported that sales were up 4.6% on the previous year despite a 1.9% drop in production, the first decline since 2002.
ANFAVEA forecast continued growth of between 3.5% and 4.5% in 2013.
Although overall sales were up, auto exports took a big hit last year, falling 20.1%, from 553.000 vehicles in 2011 to 442.100 last year, the association said.
Industry officials said a troubled global market, especially in Europe, could lead to another overseas sales drop in 2013.
In 2011, Brazil was the world's seventh largest car manufacturer after China, Japan, the United States, Germany, South Korea and India.
Latest data from December show that Brazilian auto production plunged more than expected, which contributed to the first annual decline in output in a decade. Auto production in Brazil fell 14% in December from November, Anfavea reported.
Determined to stir Brazil's economy from a stubborn slump, President Dilma Rousseff has aimed aggressive stimulus at the auto industry, which contributes one-fifth of the country's industrial output.
Sales have jumped but production has responded more tepidly to the temporary measures, reinforcing calls for deeper-reaching labour and tax reforms.
Auto sales rose 15.3% in December from November as consumers took advantage of tax incentives before the government begins to faze them out this year.
In May, Rousseff announced an emergency tax break for the auto industry, reducing prices for consumers by around 7%. Payroll tax cuts have also eased operating costs for Brazilian manufacturers and kept unemployment near historic lows.
But with productivity sliding and some incentives set to expire, carmakers have been hesitant to ramp up production and bet heavily on a sustained recovery.
The biggest car brands in Brazil: Italy's Fiat SpA, Germany's Volkswagen AG and US-based General Motors Co and Ford Motor Co, have fought to keep a combined 70% market share, with mixed results.
Fiat and VW extended their first- and second-place leads in 2012, increasing sales of cars and light trucks 11% and 10% respectively. Third-place GM and fourth-place Ford saw market share slip, as their sales grew 2% and 3% respectively, slower than the rest of the market.