UPDATE 2-Brazil auto sales soar in June as economy picks up

* Automobile sales surge to record 300,174 units in June

* Fiat Brazil CEO sees record auto sales this year

* Tax breaks aiding sales; sales rose in first 6 months

* Fenabrave keeps 3.13 pct view for 2009 sales growth (Recasts; adds Fiat CEO comments, forecasts)

SAO PAULO, July 2 - New automobile sales in Brazil soared 21.5 percent in June from May, turning in a record month as a combination of tax breaks, lower prices and improved confidence prompted consumers to flock to showrooms, the national dealers' association, Fenabrave, said on Thursday.

Sales of new cars and trucks also surged 17.2 percent from June 2008, totaling 300,174 units, Fenabrave said. Sales have risen 3 percent in the first six months to an all-time-high of 1.45 million units for the period, the association said.

The numbers underscore the success of President Luiz Inacio Lula da Silva's tax breaks on vehicles and home appliances to revive industrial production and pull the $2 trillion economy out of recession.

The renewal of the tax breaks, which the government said have proven effective in bolstering the economy, have allowed car dealers to trim prices, attracting new buyers.

"The extension will ensure (sales) gain traction" this quarter, said Cledorvino Bellini, chief executive of the Brazilian unit of Fiat, speaking to reporters in Sao Paulo on Thursday.

Fenabrave, betting on resilient consumer demand and easier credit conditions, maintained its 3.13 percent forecast for growth in car and motorcycle sales this year.

Bellini expects car sales to rise to a fresh record this year. Fiat has already spent two-thirds of its 5 billion real ($2.6 billion) 2008-2010 investment plan to increase production capacity by 100,000 units per year to 800,000, Bellini said.

TAX BREAKS

Lula this week extended the tax breaks for vehicle sales through December. Bellini said consumers brought forward their plans to buy cars in June, on concern the government would reinstate taxes on new cars.

The government also implemented some breaks for certain types of motorcycles, provided manufacturers do not resort to layoffs.

Yet Bellini warned that sales of trucks and tractors "aren't doing well," adding that "the economy needs a quick bounceback."

Fiat launched five new models this year in the country and hired about 1,000 workers between March and April. Bellini said factory capacity usage in Brazil and Argentina is nearing 75 percent, but declined to elaborate on previous usage readings.

Household consumption, which has driven Brazil's economic boom since 2004, firmed 0.7 percent in the first quarter. Brazil's economy contracted 0.8 percent in the first quarter of 2009 from the previous quarter. ($1 = 1.96 reais)